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Global Consultancies Structure To Minimise Tax

by Mike Godfrey,, New York

04 July 2002

Information provided to Congress by global consulting firms Accenture (which split from Arthur Andersen in 2000) and Monday (formed last week amid hoots of derision from PwC's consulting operations) show that both firms use a complex holding structure based on Bermuda, Luxembourg and Switzerland designed to minimise taxation.

The firms are lobbying against legislation designed to prevent or penalise what has become known as 'corporate inversion' or expatriation, as in the recent high profile cases of Namors and Stanley Works.

In both cases, the firms' ultimate holding companies are based in Bermuda, which has no corporate tax. Operating companies are then located in Luxembourg, but financing and intellectual property arms are in Switzerland.

The Luxembourg/Switzerland structure is used by many companies to shelter interest or intellectual property income, delivering an effective tax rate on such income of less than 10%, but it is a surprise to learn that the major consultancies have made such comprehensive use of structures which shelter significant tranches of their US income.

Accenture used to be a fiscally-transparent US-based partnership but after an IPO last year its partners are now shareholders in a public company, and if their personal residential arrangements permit, they can take advantage of lightly-taxed income distributed by the Bermuda holding company.

Accenture spokeswoman Roxanne Taylor told the Wall Street Journal: "With thousands of partners and employees of many nationalities, a corporate structure with a holding company in Luxembourg and the parent company in Bermuda was attractive to the partners in that it was based in countries that are commercially neutral - and for Accenture's globally diverse workforce, culturally neutral." It must have been quite hard to compile that answer without mentioning the word tax.

Ms. Taylor says the firm is "supportive of legislative proposals in the United States that address abusive transactions, including the transfer of assets outside the US without appropriate compensation."

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