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Hundreds of international companies, including IKEA, Amazon, Pepsi, and FedEx have been receiving secret deals from Luxembourg, enabling the corporations to cut their tax bill by billions of dollars, according to a report from the International Consortium of Investigative Journalists.

The report, which stems from a review of almost 28,000 pages of confidential documents obtained by the ICIJ and journalists from 26 countries, found Luxemburg's tax authorities granted hundreds of secret tax rulings—known unofficially as comfort letters—that allowed various corporations to reduce their tax rate, often to less 1%. In one instance, according to the report, New York-based Coach funnelled €36.7 million euros through Luxemburg and payed €250,000 in taxes—a rate of just below 0.7%. The ICIJ's review showed that in 2012, American corporations paid 1.1% in taxes on the $95 billion in profits transferred through the European dutchy.

The documents appear to show how Luxembourg is using a particularly complex tax code to deprive foreign governments of massive amounts of revenue. "This is the first time really that we've seen inside the workings of Luxembourg as a tax haven," Richard Brooks, the author of The Great Tax Robbery, told the ICIJ. "The countries . . . that are losing money, they don't know about it, don’t know how it operates at all."

The country's tax authority is so friendly to international business that thousands of companies have rushed to establish "offices" inside the duchy, many of which contain no visible employees and amount to little more than a mailing address. The ICIJ found 1,600 companies were technically housed in a single Luxembourg City building, and that other properties were also home to a seemingly impossible number of businesses. One-hundred and seventy Fortune 500 companies have a branch in Luxembourg.

Despite hosting branches of so many U.S. corporations and having received $416 billion in U.S. direct investment last year, Luxembourg has only 500,000 citizens and represents about one-tenth of one-percent of all overseas jobs with American companies.

The way that Luxembourg helps companies slash tax expenses is highly technical: One deal involving the Illinois-based Abbott Laboratories is said to consist of 79 different steps and companies in Cyprus and Gibraltar. According to the report, it appears that companies use Luxembourg as a base to pit different nation's tax rules against one another.

One example offered by the consortium is something called a "hybrid debt instrument." This procedure apparently lets a company move profits from a European country with a higher tax rate to a Luxembourg subsidiary. These profits are then treated as tax-deductible interest payments in Luxembourg, and dividends, eligible for tax exemption, in the company's home country. The two country's tax laws essentially cancel each other out, resulting in a substantially reduced effective tax rate.

The European Union has banned this type of tax evasion, but EU members like Luxembourg don't have to enforce the law until 2015. But the EU is nevertheless investigating whether Luxembourg's secret tax rulings for Amazon and Fiat Finance are equivalent to illegal state aid. European Union law forbids any member from giving one company an agreement that isn't available to all businesses.

Ironically, Luxembourg's former prime minister, Jean-Claude Juncker, recently assumed the presidency of the European Commission, one of the EU's most important posts. Junker has claimed his country's tax system is in "full accordance" with the law, but has also vowed to fight tax evasion as the commission's president.