In short - in time where EU right winger northern governments were gloating their countries are fine, and forced austerity on poorer, tax starved members, one of the most prominent EU right wing politician was busy rubber stamping taxes as low as below 1% to let huge corporations dodge taxes (no double taxation within EU). Since Luxembourg is tiny, even 1% from big business was cool money for them.Luxembourg and Juncker under pressure over tax deals
Politicians in France, Germany and Netherlands protest at effect of laws passed by EC chief when the country’s prime minister
Luxembourg tax files: how tiny state rubber-stamped tax avoidance on an industrial scale
French, German and Dutch finance ministers have rounded on Luxembourg for allowing multinational companies to create complicated structures to avoid billions of dollars of tax.
Pressure is also mounting on Jean-Claude Juncker, the new president of the European commission and former long-serving prime minister of Luxembourg, who oversaw the introduction of laws that helped turn the tiny European country into a magnet for multinationals who are seeking to reduce their tax bills.
The calls for Luxembourg to stop arranging special deals that help corporations avoid tax came after a vast cache of 28,000 leaked tax papers from the Grand Duchy revealed the country had been rubber-stamping tax avoidance on an industrial scale. Details of the documents were revealed by 80 journalists in 26 countries working with the International Consortium of Investigative Journalists (ICIJ), including the Guardian.
Wolfgang Schäuble, Germany’s finance minister, said the revelations about Luxembourg’s secret tax deals showed that the Grand Duchy had “a lot to do” to meet global standards.
The French finance minister, Michel Sapin, said such deals were “no longer acceptable for any country”. He added: “I wish that in a few years we never have to talk about something like this again.”
The Netherlands finance minister, Jeroen Dijsselbloem, who is also chair of the Eurogroup of all 18 finance ministers in the eurozone, said that Luxembourg was breaching international tax standards. “Many countries make agreements with companies to provide security. But these agreements need to comply with international standards. We still have some work here.”
At Westminster, Margaret Hodge, chair of the Commons public accounts committee, said: “[Juncker has] just taken over the European commission, [yet] he’s presided over the biggest exploitation of European nations in his own little country for decades.”
Despite the criticism, Juncker was said to be “very serene” and “cool”. Juncker, who took over as president of the commission on Saturday after serving 19 years as premier of Luxembourg, was scheduled to take part in a public debate on Thursday in Brussels. But he pulled out on Wednesday night as news organisations prepared to publish the leaked tax documents.
His official spokesman said Juncker did not feel under any pressure to explain how he oversaw changes to Luxembourg’s tax laws. He said: “If he were a teenager I’d say he was cool.”
Many of the tax deals – secured for companies including Ikea, Pepsi, Burberry, FedEx and Procter & Gamble – were aided by laws written during Juncker’s term of office.
The Danish tax minister, Benny Engelbrecht, said the revelations were “shocking”. “Tax payments are down to percentages that are so crazy that you can almost not even describe the challenges that they create for other countries,” Engelbrecht told the Danish paper Politiken.
Juncker is credited with helping transform Luxembourg’s economy from one relying on agriculture and steelmaking into a low-tax centre for financial services. His changes turned the small nation into the world’s richest country with a per capita income of $111,000, compared with $39,000 in the UK, according to the World Bank.
Luxembourg’s current prime minister, Xavier Bettel, called an emergency press conference to defend his country. “These rulings, as they have been done in Luxembourg, are in line with international and national rules,” he insisted. Pierre Gramegna, the Grand Duchy’s finance minister, said the comfort letter tax deals exposed in the leaked documents are “not something that’s particular to Luxembourg. It exists in a lot of countries.”
Gramegna will face tough questioning from his counterparts across Europe on Fridaywhen EU finance ministers meet in Brussels on Friday. Up for discussion is a new anti-tax-avoidance measure targeted at multinationals.
Luxembourg is already the subject of EU probes into claims that local tax agreements for Amazon and a subsidiary of Fiat amount to state aid.
Hodge, who hauled the bosses of Starbucks, Google, Amazon and the big four accountancy firms to parliament to explain their roles in UK tax avoidance, told the Guardian that Juncker should be forced to come clean about his role in turning Luxembourg into a low-tax haven for multinationals.
“I think he should come clean and talk about it, certainly try to explain it,” she said. “How can we know he’s working in the interest of Europe when as prime minister in Luxembourg he has exploited populations in every European country and elsewhere for decades?”
Ronen Palan, professor of international relations at City University, London, a specialist on tax havens, said: “Luxembourg is extremely secretive. I can’t underline [enough] how aggressive they are in denying that they are a tax haven. Now we have evidence. For the first time we have real evidence as opposed to supposition, as opposed to suspicions and so forth.”
The revelations have sparked political outrage across the world. The Australian tax office said it had launched an investigation into whether multinational firms operating in Australia were avoiding tax by using deals arranged through Luxembourg. ICIJ documents show that Ikea’s Australian arm has paid hardly any tax on an estimated $1bn profit earned since 2003, according to the Australian Financial Review’s report on the leaked documents.
“Luxembourg is extremely secretive … Now we have evidence. For the first time we have real evidence"
Ronen Palan, City University
Guy Verhofstadt, president of the alliance of liberals and democrats for Europe and former prime minister of Belgium, said: “Recent allegations against the Grand Duchy of Luxembourg on tax avoidance practices need to be clarified immediately. The commission should come to the European parliament immediately to explain if these practices are in accordance with EU law. It must be made clear, if the setup chosen by Luxembourg is legal or not.”
The anti-corruption campaign group Transparency International said: “EU ministers must now take action to end the secrecy of corporate tax deals in Europe. The Luxleaks deals could not have been kept secret if all companies were required to report details of their tax payments in every country where they operate.”
Oxfam’s tax adviser, Catherine Olier, said: “The leaks underline the scale of tax dodging – it’s not just one isolated scandal; we’re talking about a whole industry making profits disappear. Tax-dodging results in both developing and European countries missing out on billions in tax. This is money that would be much better spent on healthcare or education rather than lining already wealthy corporate pockets.
“G20 leaders meeting next week should adopt ambitious rules that will benefit all countries, including the developing countries that suffer most from corporate tax dodging.”
The anti-poverty campaign group ActionAid said: “This exposure of the industrial scale of global tax avoidance involving Luxembourg clearly highlights the need for global action.
“A fundamental rethink of the world’s tax system is needed, that puts all the issues on the table and includes all countries, including developing countries, as equal partners, to tackle these kinds of abuse.”
This is doubly bad because these tax breaks were negotiated individually - giving a lot of jobs in Luxembourg lawyer and finance sectors. This breaks EU public aid laws (enacted ironically to make market freer by removing most intra-EU subsidies). Hopefully, they will declare it as violation of them and hit it with usual fines - except, oh, wait, Juncker is now in charge of such investigations and while he doesn't have power to stop it single-handedly, he can surely mess with them and he already declared he will not exclude himself from the process.
Big corporation pocket sitting right wingers, is there anything they can't do wrong harming these they supposedly serve?
