Global Tax 50 2014: ICIJ

ICIJ is a new entry this year

The International Consortium of Investigative Journalists (ICIJ) grabbed the attention of the tax world in October, when it publicly released 28,000 sensitive documents revealing information about tax rulings agreed between multinational companies and the Luxembourg tax authorities, many negotiated by PwC Luxembourg. The episode has become known as 'LuxLeaks'. It followed up with a second batch of documents in December, this time containing details of the involvement of the other Big 4 firms in questionable tax planning. Published in full by several major European newspapers and covered extensively in the international press, the leaked documents have shone a spotlight on comfort letter rulings in Luxembourg, exposed tax avoidance by 340 global corporations and threatened to destabilise European Commission (EC) President Jean-Claude Juncker.

Juncker was prime minister of Luxembourg from 1995 to 2013, as well as holding the position of finance minister for 20 years, and the exposé has prompted calls from many in the EU for his resignation just months into his term as President.

"We started working on this issue in 2012, and in 2013 looked at offshore leaks, based on information we had for 10 companies," says Gerard Ryle, director of the ICIJ. "In January 2014 we published another series of stories about China and Hong Kong. We've also done stories on the Seychelles, the British Virgin Islands, on Jersey where we worked with The Guardian, and more."

"This is an ongoing series of stories. In 'LuxLeaks' it was looking at the role of the Big 4 in tax avoidance."

PwC says it rejects "any suggestion that there is anything improper about the firm's work" and says that any assistance given to clients regarding negotiations with Luxembourg authorities is done in accordance with all applicable tax laws and is guided by the firm's Global Tax Code of Conduct.

So just how is a small, non-profit outfit able to expose one of the founding members of the EU as being involved in questionable deals with multinational companies, inflating its wealth to make its citizens the second-richest in the world?

Led by Ryle from its headquarters in Washington, DC, the ICIJ operates teams ranging from as few as three reporters to as many as 100 to sift through documents and produce media reports.

"Pretty much every time we do a project we work with about half members and half non-members," says Ryle.

"If we think it is of public interest and a good story, we then approach media partners such as The Guardian in the UK, Le Monde in France and Suddeutsche Zeitung in Germany."

"We don't match rival organisations, for example The Guardian and The Telegraph, so that we have a group of reporters who don't feel like they are competing and in this way we can have a true collaboration."

"With technology these days we can allow journalists to search all 28,000 documents from their laptops, which previously would have been a huge task."

The LuxLeaks story – named 'Secrecy for Sale' by the ICIJ – is unusual for the ICIJ in that the documents had already been used in stories as far back as 2012. This followed a Germany documentary, which was then picked up by the BBC's flagship investigative programme Panorama.

"The reporter from the BBC is a member [of ours] and alerted us to the fact that the documents were publicly available. They were a set of documents I wanted, so I got them!" says Ryle.

"Usually you want brand new documents and it would usually be difficult to get media organisations interested. But media partners have seen the public interest and put a lot of their time and resources into going through these documents."

"Fundamentally people really care because if some people aren't paying their fair share of tax, it means that everybody else is effectively paying more."

"We have more to come," adds Ryle. "We will still be reporting on this into 2015. But we have other stories – we are not just a tax organisation and we are not just a leaks organisation."

Ryle first became interested in reporting on tax matters when working on a tax fraud case in his native Australia. He came to realise, he says, that all major frauds, money laundering and illegal arms deals go through tax havens, as the level of secrecy they maintain makes them ideal for this purpose.

"I think what needs to happen is reform of the whole tax system across the world," he says. "If big economies wanted to change the system, they could – overnight. But it is money flowing out of poor countries into rich countries so ultimately they lose a little in tax revenues, but gain a lot in the long run."

"The only thing we can do as journalists is to expose secrecy, because secrecy is how it all works."