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Corrib gas firm slashed Irish tax liability via Luxembourg

John Mulligan - Irish Independent

A company behind the controversial Corrib gas project - Canadian firm Vermilion Energy - used complicated corporate structures in Luxembourg to cut its tax liability as it spent tens of millions of euro to help bankroll development of the gas field, leaked documents show.

The company's Irish unit, Vermilion Energy Trust, is among a large number of international brands, such as Heinz and Pepsi, that have involved Irish units in plans to limit their tax liability by routing money through the tiny duchy of Luxembourg.

Irish dairy group Glanbia and family-owned construction firm Sisk have also used Luxembourg corporate vehicles to limit their tax exposure, according to the documents published by the US-based International Consortium of Investigative Journalists (ICIJ).

Companies such as healthcare firm Covidien, Heinz, Pepsi's bottling unit and global accountancy firm Accenture all involved Irish-linked arms in Luxembourg schemes designed to lower their tax bills.

Sisk declined to comment yesterday, as did Heinz.

Household names from all over the world - from Ikea to Federal Express - have used Luxembourg to help lower their tax liabilities by billions of dollars - it's all completely legal.

Documentation shows that Vermilion secured a tax ruling in 2009 in Luxembourg just months after it acquired an 18.5pc stake in the hugely controversial Corrib field. The rulings secured by companies provide written assurance that their tax-savings plans will be viewed favourably by Luxembourg authorities.

Vermilion bought its Corrib stake from energy firm Marathon in June 2009, agreeing to pay up to $400m (€322m) for the holding.

International resources giant Shell and Statoil own the rest of the project, which is Ireland's largest ever energy development.

The total investment in the Corrib project is set to top €3.6bn by next year. It was originally envisaged that commercial gas output from the field off the west coast would begin in 2003, but it's now more than a decade behind schedule.

Vermilion told Luxembourg authorities in 2009 that it expected to invest as much as $400m in developing the Corrib field. It used a French subsidiary to acquire its stake. the interest in the project.

It then planned to use entities in Luxembourg, Hungary, the Cayman Islands and Barbados to effect a transfer of loans from a new Luxembourg vehicle to other group firms.

"At a first stage, the funds should be mainly used to finance activities in Ireland," notes the documentation used to detail the plan.

Global accountancy firm PricewaterhouseCoopers (PWC) helped many of the companies secure special tax rulings in Luxembourg.

It said the ICIJ report is based on "partial, incomplete information dating back four years or more, which was illegally obtained".

"Intra-group financing is a norm of international business and Luxembourg is a long-standing centre for financing activity for companies with international operations," it added.

But despite the legality of the tax-avoidance schemes, they have again raised concerns in Brussels at how global corporations manage to lower their liabilities through complex structures.

The ICIJ report said that 300 companies had secured tax deals with Luxembourg authorities and it heaps pressure on new European Commission president Jean-Claude Junker, who was Luxembourg's prime minister for 24 years, to reveal if he knew such deals existed during his tenure.

"The commission is already acting," said a European Commission spokesman.

Luxembourg prime minister Xavier Bettel said his country was not breaking any international rules and wasn't the only country to permit tax schemes by large companies.

Finance Minister Michael Noonan - who's doing away with controversial corporate schemes used by multinationals here to avoid tax - said that closing taxation gaps required international cooperation.

Posted Date: 
7 November 2014