Juncker in spotlight after Luxembourg tax revelations

These schemes were approved by the tax office of Luxembourg at a time when Jean-Claude Juncker was the duchy's PM.

On Wednesday (5 November), the investigative journalists published 548 leaked Luxembourg tax rulings from 2002 to 2010.

These rulings are also called comfort letters and give a company the reassurance that its proposed tax scheme is approved by the tax authorities.

The European Commission has been trying to acquire such comfort letters from Luxembourg in their investigation of American online shop Amazon and Italian car manufacturer Fiat.

In October, the commission announced that Luxembourg had provided Brussels with some of the requested information but “the Luxembourgian authorities have still not fully complied with the Commission's information request”.

It is not clear if some of the comfort letters the Commission has not yet received, are among the leaked files.

The arrangements between the companies and Luxembourg are legal. However, they are certain to raise awkward questions.

The leaked documents demonstrate tax arrangements negotiated by PricewaterhouseCoopers, which in a reply to the consortium called the documents “outdated” and “stolen”.

One such document shows how PricewaterhouseCoopers advised Dutch clothing company WE Group several times on how to reduce its tax burden, as reported by newspaper Trouw.

Under the model, a separate company is founded in Luxembourg, which acquires the exclusive intellectual property rights to one of the clothing company's brands. For every clothing piece of that brand, WE pays royalties to the Luxembourg company.

Not only does WE reduce its profit tax due in the Netherlands, it also benefits from Luxembourg's special low taxation of royalties: 80 percent of the royalties are exempt from taxation.

The law, which allows companies this generous tax exemption from royalties, was signed when Jean-Claude Juncker was prime minister of Luxembourg.

The now-European Commission chief was a strong defender of Luxembourg's tax system at the time.

He recently told German TV: "No one has ever been able to make a convincing and thorough case to me that Luxembourg is a tax haven."

However, the revelations come just a few days into his new job as commission president and amid a growing public backlash against tax-avoidance schemes.

Meanwhile, it is not only companies that benefit from the tax rules in Luxembourg.

A Canadian pension fund that invests on behalf of public servants also set up a scheme to avoid paying taxes, the CBC reported.

For his part, German Green MEP Sven Giegold said on Thursday that the "mass corporate tax avoidance" schemes are "a major blow to … [Juncker’s] credibility”.

“The fact that … [he] served as Luxembourg's finance and prime minister throughout this period makes him directly complicit".

Giegold added that EU finance ministers meeting in Brussels on Friday “must immediately respond to these serious revelations”.