Zara Under Fire as Greens Warn EU Tax Dodging Still in Vogue

  • Clothing chain’s owner cut taxes by $624 million, Greens say
  • Previous report targeted furniture giant Ikea’s tax planning

Inditex SA, the world’s biggest clothing retailer and owner of the Zara and Massimo Dutti brands, was accused by the Green Party of using “aggressive” techniques to sidestep at least 585 million euros ($624 million) in taxes from 2011 to 2014.

Without an overhaul of European Union policy, “multinationals and their tax consultants, together with states which choose to engage in destructive tax competition, will continue to get around efforts to clamp down on profit-shifting and tax avoidance,” the Greens/EFA group in the European Parliament said in a report released in Brussels on Thursday.

The Spanish clothing giant rejected the content of the report, saying it was “based on mistaken premises that lead to erroneous conclusions.” Inditex said it scrupulously complies with tax rules in all the markets where it operates.

Inditex is the latest target of the Green lawmakers, whose previous reports threw the spotlight on how furniture maker Ikea may have avoided paying at least 1 billion euros in taxes to European Union nations over six years.

The European Commission said it was pleased that some of the main measures called for in the report are proposals that it has already made.

“These proposals, together with the many other EU measures we have put forward to block tax abuse, will create much more transparency on the tax practices of multinationals and will ensure that taxes are paid where the real economic activity is based,” Vanessa Mock, the commission’s spokeswoman for financial services and taxation, said in an e-mailed statement.

Richest Person

Controlled by Spanish billionaire Amancio Ortega, Europe’s richest person, Inditex posted 20.9 billion euros in sales last year, and has 7,100 stores in 93 countries. Other Inditex brands are growing, but Zara still accounts for two-thirds of sales.

The Greens’ report comes as the EU probes the legality of tax deals that international companies such as Inc. and Starbucks Corp. struck with governments. The European Commission in August slapped a bill of as much as 13 billion euros plus interest on Apple Inc. over what it called an illegal accord with Ireland.

Inditex has been using aggressive corporate tax avoidance techniques between 2011-2014, mainly in the Netherlands, Ireland and Switzerland, the Greens said. The techniques used are “currently legal,” but raise “questions whether Inditex pays taxes where its real economic activity takes place,” the report said.

‘Fiscal Responsibility’

“Operations between companies of the group are audited regularly by the tax authorities,” Inditex said in an e-mailed statement Thursday, adding that it acts always with “maximum fiscal responsibility.”

The Greens called for are mandatory country-by-country-reporting “of key financial data,” a common consolidated corporate tax base and a minimum corporate income tax throughout EU.

Responding to the Greens’ report in February, Ikea Group said it paid about 822 million euros in corporate income tax globally “which equals an effective corporate income tax rate of just below 20 percent.”

At a European Parliament hearing in March, Ikea said its tax affairs are in line with international rules, echoing comments by other firms targeted by EU probes, including McDonald’s Corp. and Apple.

— With assistance by Charles Penty

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