Belfast Telegraph

Company that bought over west Belfast packaging firm is accused of tax avoidance

By Laura Abernethy

A Finnish company that recently bought a west Belfast packaging firm has been accused of avoiding millions in tax.

Food and drink packaging giant Huhtamaki took over Delta Print and Packaging in a £80m deal just a fortnight ago.

Delta - which produces food packaging for companies such as McDonald's, KFC and Kellogg's - also employs more than 200 people at its plant in Lurgan and paper recycling unit in Lisburn.

But Huhtamaki has allegedly been funnelling millions through a Dublin-registered shell company to Luxembourg in a complex intra-company 'hybrid-loan' finance structure.

Although this procedure is entirely legal, it has been described as an aggressive tax avoidance scheme.

Huhtamaki was among 340 global firms identified in LuxLeaks files as having secured secret deals from Luxembourg authorities that enable them to slash their global tax bills.

It was reported at the time that LuxLeaks companies had channelled hundreds of billions of dollars through the duchy and saved billions of dollars in taxes. Some firms enjoyed effective tax rates of less than 1% on the profits they funnelled into Luxembourg.

Leaked documents reveal that Huhtamaki formed an Irish-registered company in 2010 after receiving advice from consulting firm PriceWaterhouseCoopers (PwC) that funnelling funds to Luxembourg would help Huhtamaki slash its global tax bill.

Since 2010 Huhtamaki Unlimited Ireland (HUI) has loaned more than $500m to a Luxembourg-based subsidiary, Huhtalux S.a.r.l.

The Dublin-registered firm paid no income tax or corporation tax in 2015, nor does it have any Irish employees, according to its latest set of accounts.

A spokeswoman for Huhtamaki told the Sunday Independent: "As a publicly listed company, we do not comment on specific financing arrangements.

"One of the reasons for having financing companies in Ireland is the country's legislation that allows a bookkeeping currency other than euro - which in turn allows cost-efficient hedging without external costs."

However, the International Consortium of Investigative Journalists, the body behind the LuxLeaks and Panama Papers suggested there may be another reason for the structure.

A spokesperson said: "One of the main benefits of the Luxembourg tax system is the treatment of interest.

"Companies registered in Luxembourg are exempt from tax on interest income. So it makes sense for multinationals to structure their operations so profits from other countries can flow into Luxembourg as interest.

"Look for signs that foreign profits get transformed into interest when going into Luxembourg. A clever way to do this is by so-called hybrid loans.

"These have all the characteristics of equity - and are treated as such in most countries - but Luxembourg approves these as debt for tax purposes."

Belfast Telegraph