Overnight, the International Consortium of Investigative Journalists broke open a new scandal involving the Koch Brothers intricate plan, dubbed "Project Snow", to dodge taxes.
I've previously written about the ICIJ's ground-breaking work revealing how hundreds of international companies cut secret dealswith Luxembourg's tax authorities to avoid paying taxes.
The Koch Brothers revelations, however, are new, and involves other big companies like Disney and Skype. It's a scam enabled by the four largest accounting firms: Price WaterhouseCoopers, Ernst & Young, Deloitte and KPMG. Here are the details:
Koch’s Luxembourg transactions revealed by the new documents involved its chemicals and polymers subsidiary Invista BV, which makes Lycra-brand fiber and Stainmaster-brand carpets.
The Koch documents, also prepared by Ernst & Young, describe “Project Snow,” a 26-step restructuring of Invista designed, they say, to simplify the company’s structure, centralize its cash flow into Luxembourg, and pay down debt.
The restructuring was worked out in a series of four meetings in late 2008 and early 2009 between Ernst & Young employees and Marius Kohl, head of the Bureau d’imposition Sociétés VI, part of Luxembourg’s revenue authority, according to the tax ruling. Kohl, now retired, approved thousands of tax deals over 22 years that helped save companies billions of dollars.
The documents show that in the restructuring, which took place starting in September 2008, the subsidiaries of Invista passed hundreds of millions of dollars back and forth, converting shares to debt and occasionally dissolving firms. Tax-free “hidden distributions” among subsidiaries are just one type of head-spinning transaction included in the confidential tax ruling approved by Luxembourg authorities. Another section describes a $736 million loan that gets passed from company to company until a U.S.-based subsidiary becomes “both the debtor and creditor of the same debt,” and the debt is canceled.
Each step in the tax ruling includes a separate interpretation of how it will impact the company’s taxes in Luxembourg. In most instances, the transactions are exempt.
Central to Koch’s restructuring deal is an internal company bank, Arteva Europe S.à.r.l., which manages the cash flows of the company’s European operations through Luxembourg. Arteva had established a Swiss branch that likely benefited from low tax rates in Switzerland. Luxembourg officials agreed to treat the Swiss branch as separate from the Luxembourg company, according to the tax deal.
From 2010 through 2013 the company paid $6.4 million in taxes on $269 million in profits. Its highest annual tax rate was 4.15 percent.
Arteva reported no staff costs in its annual financial reports filed in Luxembourg. In Switzerland, Arteva’s branch shares an address in Zurich with a firm called Tax Partners AG, whose principals are also listed in public filings as the deputy branch managers of Arteva, according to reporting by ICIJ partner, The Guardian. The branch manager of Arteva Switzerland describes himself on the web site LinkedIn as “tax director, Europe” for Koch International Shared Services. [emphasis added]
By the way, one of these companies was part of a U.S. election fraud:
Koch Industries admitted in 2011 that one of the key companies in its Luxembourg holdings, Invista S.à.r.l., had funneled a dozen illegal campaign contributions to state political candidates in Virginia, Delaware and Kansas and to the U.S. Democratic Governors Association. The company agreed to pay a fine of $4,700.
In its submission to the Federal Election Commission the company said that “the violations resulted from a general lack of knowledge among company personnel of either the nature of Invista's legal structure or of the restrictions that applied to it as a foreign company.”
Just to recall, what the Koch Brothers is doing is part of the general robbery of the U.S. Treasury undertaken by many companies who keep money stashed abroad--
that amount is now almost $2 trillion--through a variety of scams, particularly through so-called "tax inversions" (which I've written a number of pieces about including
here,
here and
here)
So, now, let every potential Republican presidential candidate in 2016 (oh, and, alleged "Democratic" governor of New York State, who received more money from the Koch Brothers than Scott Walker) answer the simple question every voter might want to know: when you pocket the Koch Brothers money, can we assume that you support the fleecing of American taxpayers, who, unlike the Koch Brothers, have to pay their taxes in a transparent way?