Tuesday

4th Oct 2022

MEPs demand answers from Juncker over Luxembourg tax deals

  • Luxembourg: Did the micro-state duchy help firms avoid paying tax in fellow EU states? (Photo: Jimmy Reu)

A week after the LuxLeaks revelations and as a new report into tax practices of 15 EU countries is published, pressure is mounting on EU commission chief Jean-Claude Juncker to give some answers.

The Socialists, Greens and Liberals in the European Parliament have demanded that Juncker, who was prime minister of Luxembourg for 19 years, explains his involvement in the tax policies of his country which allowed hundreds of firms like Ikea, Pepsi or Deutsche Bank to pay as little as under one percent tax on their profits made in other EU countries.

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The Liberals have gone one step further by calling for a temporary inquiry committee in the European Parliament that should look at the matter.

"In view of the recently published Luxembourg Leaks, we have the duty to investigate the legality and the legitimacy of tax avoidance. If a cooperation between governments and big enterprises leads to tax avoidance, this has to be addressed in a broader context which goes beyond just Luxembourg," German Liberal MEP Michael Theurer said Tuesday.

Meanwhile a new report published Wednesday (12 November) by the European Network on Debt and Development (Eurodad), a coalition of non-governmental organisations, shows that tax practices in 15 EU countries including Luxembourg are "facilitating tax dodging" by corporations and individuals in what amounts to a "race to the bottom" of who has the more attractive system.

Apart from Luxembourg, the Netherlands and Ireland, which are already under the EU commission's scrutiny for these tax deals, several other countries are also being flagged up.

Spain, followed by the UK and Sweden, top the ranking when it comes to tax reductions for companies which make their profits in developing countries, meaning that those countries were stripped of billions in taxes.

Meanwhile, France and the UK are the countries with the highest number of tax treaties with developing countries: 72 and 66, respectively.

"These treaties often push down the taxation levels on financial transfers out of developing countries, and thus create routes through which transnational corporations can avoid taxation," the report reads.

Germany, Luxembourg, the Netherlands, Spain and Sweden receive a red light on transparency, as they lack transparency on company ownership at the national level or are resisting EU-wide initiatives to promote transparency on company ownership.

Belgium is described as a country which despite high taxes for the average employees, has "numerous corporate tax deductions" for foreign companies which can pay as little as 9 percent tax, according to the Eurodad report.

EU competition commissioner Margrethe Vestager, who has inherited four cases into tax deals in Luxembourg, the Netherlands and Ireland, on Tuesday told MEPs in the economics committee it was important to solve these cases first before moving to new probes potentially stemming from the Luxembourg Leaks revelations.

Asked how Juncker can still be head of the EU commission which is now tasked to look into the tax deals he oversaw as prime minister, Vestager said: "I have not heard of, or myself experienced, anything that would tie my hands, not at all. On the contrary what I have experienced is that I have a free hand to do what I find right in these cases."

She said tax deals were a common, legal practice, but that they can be a "problem" if they give companies an unfair advantage on the EU market or if they amount to direct state aid.

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