As Volkswagen's murderous Dieselgate scandal has unfolded, the company has steadfastly maintained that even if it did kill thousands of people with its toxic cars, at least it pays its taxes.
But an investigation in Der Speigel reveals that VW has created "an almost impenetrable web of capital networks and cash flows within Luxembourg worth a total of 17 billion euros," a move the company swears "has nothing to do with a tax-shelter scheme."
The Luxembourg companies employ a total of five staffers.
VW finds the situation to be completely normal. "The personnel configuration of our companies in Luxembourg is of high quality and adequate for the task at hand," the company said in a statement. In accordance with a verdict from the European Court of Justice, the statement continues, a company doesn't have to hire more staff than absolutely necessary.
The structure works as follows: From 2014 to 2016, VW subsidiaries have transferred 5.8 billion euros to Luxembourg. The holding company there, VFL, declared profits over that time period of 3.5 billion euros but paid only 1.7 million euros in taxes – a tax rate of just 0.05 percent.
Subsidiaries such as SEAT and Skoda, of course, pay corporate taxes in the countries where they are based and only transfer their net profits to Luxembourg. As such, VW declares that it is "economically correct" that VFL pays no taxes on the money transfers. Were the profits to be sent to a Germany based holding company, VW would have to pay an additional 5 percent in corporate and other taxes.
But in recent years, the Luxembourg holding company has only sent a portion of those profits on to VW's Wolfsburg headquarters. At least 3.5 billion euros either remained in Luxembourg or were transferred back to the country – and essentially recycled as loans within the Volkswagen Group – a second source of profit for VFL.
A Peek Behind the VW Tax Haven Curtain
[Simon Hage, Martin Hesse and Blaz Zgaga/Spiegel]
(via Naked Capitalism)