Wednesday

19th Feb 2020

LuxLeaks whistleblowers fined and put on probation

  • Tax haven Luxembourg became a magnet for tax avoiding corporations. (Photo: Jimmy Reu)

A court in Luxembourg on Tuesday (29 June) fined and gave suspended sentences to two men who helped increase global tax transparency by revealing how corporations hid away profits using shady government-backed deals.

Documents obtained from PricewaterhouseCoopers (PwC) by former employees at the accountancy firm, Antoine Deltour and Raphael Halet, had exposed how big firms managed to slash tax bills from the 29 percent corporate tax rate to close to zero.

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Some 340 companies, including big names like Pepsi, IKEA, and Deutsche Bank, had secured the secret deals from Luxembourg authorities.

Billions of euros that should have gone to national budgets were instead shuffled away using elaborate schemes drafted by PwC with the complicit approval of the Grand Duchy.

Deltour faced charges of theft, violating the Grand Duchy’s secrecy laws and illegally accessing a database. Halet faced similar charges.

Deltour was given a 12-month suspended sentence and fined €1,500 for revealing the ruse. He had initially faced five years in jail and a €1.25 million fine. Halet was fined €1,000 and given a nine-month suspended sentence.

The deals were first disclosed on the French television show "Cash Investigation" in May 2012 by Edouard Perrin. PwC filed a complaint shortly after the report had been aired.

Perrin, for his part, was acquitted by the Court on Tuesday.

International Consortium of Journalists

The scandal took on a whole new dimension in November 2014 when the International Consortium of Journalists, after having reviewed 28,000 pages of confidential documents, released a series of articles by a team of more than 80 journalists from 26 countries.

The exposure and ensuing scandal piled on public pressure for governments and the EU commission to act to roll back the schemes.

It had also boosted efforts by the Paris-based Organization for Economic Cooperation and Development (OECD) to get governments around the world to increase tax transparency through it's so-called BEPS (Base Erosion and Profit Shifting) Project.

The idea is, in part, to prevent firms from shifting their profits to a country where they are either taxed at low levels or not at all.

German liberal MEP Michael Theurer, who helped steer an EU parliament probe into the tax schemes, told this website Deltour and Halet should have been awarded for their efforts.

"Without Antoine Deltour and his colleague, we would have never learned about the dimension of these harmful tax practices in Luxembourg," he said.

The EU parliament tax probe is set to end next week with a report that recommends the EU commission draft an EU-wide whistleblower protection law.

Jean-Claude Juncker

Tuesday's verdict is likely a further embarrassment for EU commission president Jean-Claude Juncker.

In mid-2014, he told German television Luxembourg was not a tax haven.

"No one has ever been able to make a convincing and thorough case to me that Luxembourg is a tax haven," he said.

But the OECD, had only a year earlier, found that Luxembourg failed to comply to international standards of transparency and exchange of information.

Juncker was Luxembourg's prime minister when many of the deals were being cut. And he had also been Luxembourg's finance minister.

The broader revelations of the tax deals hit only weeks after he took his position at the EU commission helm.

Over a year later he denied any role in the schemes and told skeptical MEPs they were exaggerating his "political talent".

While Juncker may have managed to weather the pressure of the revelations, he was never able to fully regain credibility on the issue.

New tax policies

The EU commission is eager to prove otherwise. In January, it rolled out its anti-tax avoidance package.

Then in March, member states reached a political agreement on the automatic exchange of tax-related financial information of multinational companies.

A month later, the EU commission proposed public tax transparency rules for multinationals or country-by-country reporting. NGOs say the proposal won't work because it is too limited.

The OECD, for its part, had been asked by the G20 to look at corporate tax with the aim of launching an automatic exchange of tax information between states by 2018. Some 100 countries have signed up.

The OECD will this week in Kyoto open its BEPS project to all countries, including developing and emerging nations.

"In the 18 months following LuxLeaks, more progress has been achieved on corporate tax transparency than in the last 10 years," said the Brussels' office head of Transparency International Carl Dolan.

LuxLeaks trial to be whistleblower showcase

The trial of Antoine Deltour, who leaked documents on Luxembourg's sweetheart tax deals with big firms, will be used by campaigners and politicians to push for a law to protect whistleblowers.

Finance ministers baulk at tax-avoidance rules

Member states will discuss again in June a proposed directive to outlaw practices used by large companies to avoid paying taxes. Meanwhile, the European Parliament makes progress on its probe of Panama Papers.

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