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Devizes Link To Lux Leaks Tax Dodging

Monday, February 23, 2015

Jardine Matheson Lux Leaks Tax Dodging Has Links To Devizes Tory Donor And Is Tip Of UK Tax Shirking On Industrial Scale

UK Crown territories that refuse to play by transparent tax rules need to be stripped of links with the Queen and look elsewhere for new Head of State says GMB.

GMB is advising the electorate in Devizes parliamentary constituency area that Henry Keswick, whose company Jardine Matheson Group was involved in tax avoidance using the Luxemburg loopholes, lives in the area and with his brother they donated £711,650 to the Conservative Party since 2001.  

Jardine Matheson Group is one of the 340 global companies identified by the International Consortium of Investigative Journalists (ICIJ) investigation whose files have become available thanks to the ‘Luxembourg Leaks.’ The leaks, over 28,000 pages of tax documents, show a confidential cache of secret tax arrangements approved by the Luxembourg Authorities that provide tax relief for these companies. With complex structures, the global companies can avoid billions in taxes by routing their profits through Luxembourg. See information in notes to editors on what is known re Jardine Matheson Group using Luxemburg.

Tax avoiding companies use the Luxembourg tax system for the treatment of interest with companies registered in Luxembourg being exempt from tax on interest income. Another benefit of the Luxembourg tax system is the 80% tax exemption on income from intellectual property which foreign subsidiaries pay for the use of brand names, patents and distribution rights and the money ends up in Luxemburg. See notes to editors for details of how companies use loopholes to avoid paying taxes in UK.

Henry Keswick and his brother Simon, directors of Jardine Matheson Holdings, are large donors to the Conservative Party having donated £711,650 since 2001. These include donations from another brother, Chippendale, and Henry’s wife, Tessa. Sir Henry Keswick and family are ranked 37th in the Sunday Times Rich List with wealth of £2,445m. An Etonian, Henry Keswick is a major donor who attended a Leader’s Group event featuring a meal and with a minister in attendance. Also linked is Lord Leach of Fairford, Conservative peer and director of Matheson & Co, who donated £34,500 to the Conservative Party. Other members of the board include Lord Sassoon, Conservative peer and commercial secretary to HM Treasury from 2010-2013 and Lord Charles Powell, Private Secretary to the Prime Minister from 1983-1991.

Paul Kenny, GMB General Secretary, said "Tax avoidance and tax evasion on an industrial scale is endemic, systemic and deep rooted in the City and for wealthy people like Henry Keswick across the UK.

Secrecy jurisdictions i.e. tax havens - use secrecy to attract illicit and illegitimate or abusive financial flows.

Luxemburg is not an isolated case. Secrecy in tax matters in UK territories combined lead to them to top the world tax avoidance league table and UK companies make full use of this secrecy.

An estimated £20,000 billion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world.

A global industry has developed involving the world's biggest banks, law practices and accounting firms which not only provide secretive offshore structures to their tax- and law-dodging clients, but aggressively market them. 'Competition' between jurisdictions to provide secrecy facilities has, particularly since the era of financial globalisation took off in the 1980s, become a central feature of global financial markets.

The secrecy world give rise to fraud, tax evasion and aggressive tax avoidance, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering and creates political impunity.

The next Labour Government has to use all its powers to stop this secrecy. Crown territories that refuse to play by the rules need to be stripped on links with the Queen and look elsewhere for a new Head of State."

End

Contact: Cath Speight GMB National Political Officer 07506 711925 or Kamaljeet Jandu, GMB National Equality and Diversity Officer on 07956 237178 or Gary Doolan, GMB National Political Officer on 07852 182358 or Martin Smith, GMB National Organiser on 07974 251722 or GMB Press Office 07921 28988.

Notes to editors

1 How the Luxemburg tax evasion works

A company sets up a subsidiary in Luxembourg and use accounting tricks to avoid paying 100’s of millions in tax bills. Luxembourg has a corporate tax rate of 29% but corporations use accountants to devise complex tax avoiding schemes. The Luxembourg government approves these private deals, tax rulings, and the 29% tax rate is cut to almost zero.

There are 3 tricks:
1 – Internal Loans
Sets up internal lending structures in Luxembourg – like setting up your own bank which you use to lend money to yourself, overseas. Your international part pay the money back plus interest shifting cash back into tax friendly Luxembourg.

2 – Royalty payments
A Luxembourg subsidiary can take control of a company brand name and then charge for its use overseas. Hefty royalties are paid back into Luxembourg where there’s an 80% tax exemption.

3 – Turning losses into wins
Losses can be put to good use. Decreases in the value of investments can be used for a tax offset against future profits without having to sell the investment.

This is why some of the biggest names in global business have set up Luxembourg outposts.

More complex version
Financial structures are used in Luxembourg which pay very little tax and secure them tax deductions in the countries where they do most of their business.

Ordinarily if an HQ is paid for supplies it sends to a subsidiary in another country the subsidiary can claim a tax deduction for those supplies. But the HQ is taxed on the payments it receives.
So, HQ provides loans – taxed on interest
Subsidiary – will get tax deduction

This is where Luxembourg comes in. The HQ sets up a branch in Luxembourg and a separate financing subsidiary. It uses loans and interest charges to shift profits from doing business where the subsidiary was based into Luxembourg. The subsidiary tells it’s tax authorities that it is paying interest on a loan from its Luxembourg company. As before, interest payments are tax deductable so it pays no tax but interest income is taxable in Luxembourg so you would expect tax to be levied. Separately, the HQ lends a similar amount to its branch in Luxembourg, mirroring the loan from the Luxembourg financial structure to its subsidiary. It persuades the Luxembourg authorities to consider both of its Luxembourg offices under one tax return. Used together, they say the loans to the subsidiary are effectively being passed on from the HQ. This allows the HQ in Luxembourg to claim a tax deduction. This almost entirely cancels out the tax bill created by its interest income from the subsidiary company.

It could be expected that tax would finally be charged in the home of the HQ when it receives interest income. But the authorities view the Luxembourg branch as an integral part of the HQ so no payments are seen. Consequently the tax authority see nothing which can be taxed. We now see a tax deduction by the subsidiary company. No corresponding tax charges in the home of the HQ and almost no charges in Luxembourg.

2 How Jardine Matheson Group operated in Luxemburg:

One of the 340 companies that had their secretive tax deals released by the ‘Luxembourg Leaks’ exposé is the Jardine Matheson Group through Jardine Matheson International S.a.r.l – Project JMI. They were advised by PwC and the amount intended to be invested was €60 million. 

At the time PWC were advising this project (2009) the Jardine Matheson Group (JMG) owned a large and broad portfolio of companies that are ‘leaders in the fields of engineering and construction, transport services, insurance broking, property investment and development, retailing, restaurants, luxury hotels (Mandarin Oriental International Ltd), motor vehicles (Jardine Motors Group), financial services, heavy equipment, mining and agri-business. The Group also has a minority investment in Rothschilds Continuation, the merchant bank.’

The Group's interests include Jardine Pacific, Jardine Motors, Jardine Lloyd Thompson, Hongkong Land, Dairy Farm, Mandarin Oriental, Jardine Cycle & Carriage and Astra International, while the Group also has a minority interest in Zhongsheng Group, one of mainland China's major motor dealership groups. It has a 42% interest in the insurance and reinsurance company, Jardine Lloyd Thompson Group plc.

Jardine Matheson Holding Ltd is incorporated in Bermuda employing around 390,000 people worldwide with an underlying profit in 2013 of $1.5bn on a gross revenue of $61.4bn. It has regional offices in the UK, Bermuda, Hong Kong, Singapore, Indonesia, Cambodia, China, Malaysia, Myanmar, The Netherlands, Philippines, Taiwan, Thailand and Vietnam.

The leak, dated 13 May 2009, details the transfer of Jardine Matheson International N.V. from the Netherlands Antilles to Luxembourg and becoming Jardine Matheson International S.a.r.l.

Further information on Project JMI can be found here: https://s3.amazonaws.com/s3.documentcloud.org/documents/1345594/jardine-matheson-group-2009-tax-ruling.pdf

UK Office: Matheson & Co Ltd, 3 Lombard Street, London EC3V 9AQ.

Head Office: Jardine Matheson International Services Ltd, 4th Floor, Jardine House, 33-35 Reid Street, Hamilton, Bermuda HM12.

Directors of Jardine Matheson Holdings Ltd are:

Sir Henry Keswick      -           Chairman
Ben Keswick               -           Managing Director
Adam Keswick           -           Deputy Managing Director

Mark Greenberg         -           Group Strategy Director

Simon Keswick         -           Executive Director

Lord Leach of Fairford     -           Executive Director

Richard Lee                -           Director

Anthony Nightingale    -           Director

Y K Pang                     -           Executive Director

James Riley                -           Group Finance Director

Lord Sassoon             -           Executive Director

Percy Weatherall        -           Director

Giles White                 -           Group General Counsel
 

Group Companies include:

Jardine Pacific

Gammon Construction                       Hong Kong Air Cargo Terminals

Jardine Aviation Services       Jardine Engineering Corporation

Jardine OneSolution               Jardine Property Investment

Jardine Restaurant Group      Jardine Schindler

Jardine Shipping Services      Jardine Travel Group

Jardine Motors

Zung Fu                                               Jardine Motors

Jardine Lloyd Thompson

Jardine Strategic

Hong Kong Land

Dairy Farm

Manderin Oriental Hotel Group

Jardine Cycle & Carriage

Astra International

 

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