LUXEMBOURG: Luxembourg was under fire yesterday after leaked documents revealed its huge tax avoidance deals with hundreds of top global firms, putting its former premier Jean-Claude Juncker under the spotlight in his first week as EU commission chief.
Household names such as Pepsi, IKEA and Deutsche Bank were among companies named by the US-based International Consortium of Investigative Journalists (ICIJ) following a six-month investigation of 28,000 leaked documents.
Billions of dollars were funnelled through the tiny European duchy of Luxembourg thanks to complex financial structures that allowed companies to slash their tax liabilities, depriving hard-up governments around the world of vital revenue. The revelation comes at a particularly awkward moment for Juncker, who took office on Saturday as head of the EU’s executive arm after 19 years as Luxembourg prime minister, during which many of the deals were made.
Luxembourg’s current Prime Minister Xavier Bettel insisted that the sweetheart tax deals were legal. “I want to underline that these (tax) rulings conform to international laws,” Bettel said.
Juncker presided over the tax affairs of Luxembourg for over two decades, guiding the country from being a sleepy European backwater to a prized destination where hundreds of the world’s biggest companies now base their affairs.
Juncker’s spokesman said the European Commission was already investigating whether Luxembourg’s tax deals with US Internet shopping giant Amazon and the financial arm of Italian carmaker Fiat amounted to illegal state aid. “If the decision is negative, Luxembourg will have to take corrective actions,” spokesman Margaritis Schinas said.
On Wednesday, asked about the tax policies he once led, Juncker told journalists that he “had his ideas” about the matter but would do nothing to affect the EU’s investigation “as this would be indecent”.
In its investigation, the ICIJ found that global accounting giant PricewaterhouseCoopers had helped multinationals in question secure at least 548 tax rulings in Luxembourg between 2002 and 2010. The documents uncovered details of so-called Advance Tax Agreements — pre-negotiated deals which set out how companies will be taxed. “It’s like taking your tax plan to the government and getting it blessed ahead of time,” the ICIJ quoted Connecticut School of Law tax expert Richard Pomp as saying.
The controversial practice, also called “tax rulings”, is the subject of the EU’s probes into Luxembourg’s deals with Amazon and Fiat.
The EU has power over member states tax affairs as such, but it can probe whether they amount to illegal state aid, which breaches the 28-nation bloc’s rules on free trade and competition. AFP
