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14th Aug 2022

LuxLeaks firm advising EU commission on tax

  • The Grand Duchy was the centre of an investigation by reporters into tax dodging deals (Photo: R/DV/RS)

A firm directly involved in one of Europe’s largest tax scandals is now giving tax advice to the European Commission and member states.

The audit firm, PricewaterhouseCoopers (PwC), sits in a group called the EU Joint Transfer Pricing Forum.

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The forum’s been around for years, but its mandate was recently renewed, and it held its first new-model meeting last week at the Albert Borschette Congress Centre in Brussels.

Transfer pricing is a method used by multinationals to minimise taxes.

The forum contains 18 experts and 28 officials, one from each EU state.

Two of the experts come from civil society: Financial Transparency Coalition and Eurodad, Brussels-based NGOs.

But it’s chaired by Bruno Gibert, a lawyer at the Paris-based corporate law firm CMS Bureau Francis Lefebvre, which specialises in transfer pricing.

Apart from PwC, it includes audit firm Deloitte.

It also includes the head of global transfer pricing at German chemicals giant Bayer, Spanish energy giant Repsol, and car giant Volvo, among others.

Eurodad’s Tove Ryding told EUobserver that “it’s not a legislative organ, but they do define a lot of recommendations which can later translate to soft law and then into hard law”.

Gibert couldn’t be contacted for comment.

But his law firm’s website says the forum’s “initial aim was to develop a strategy to reduce compliance costs and remove tax obstacles hindering cross-border economic activity between EU countries”.

The forum has helped to elaborate transfer price rules, related management fees, and advanced pricing agreements (APAs).

The APAs were instrumental in letting hundreds of big companies based in Luxembourg pay next to no tax around the world thanks to confidential deals masterminded by PwC.

The LuxLeaks scandal erupted last November, when journalists published thousands of leaked PwC of documents showing that the deals, also known as tax rulings and comfort letters, saw multinationals pay less than 1 percent tax on profits.

But PwC remains largely unapologetic.

In May, its head of tax policy, Stef van Weeghel, told MEPs not to make a fuss about isolated cases.

“If we focus on a particular country and on a particular regime or ruling, it could indeed be that there is very little taxation in that country. But if we look at the overall effective tax rates of multinationals … we find that these are quite high”, he said.

Deloitte head of UK tax policy Bill Dodwell warned that high taxes get passed on to consumers.

The European Commission, for its part, is taking LuxLeaks more seriously.

It has political skin in the game because the commission president, Jean-Claude Juncker, was PM in Luxembourg when the tax rulings took place.

In one response, it launched a so-called Tax Transparency Package earlier this year.

Its anti-trust wing is also looking into potential tax abuse in other member states, but one case specifically involves Amazon and transfer pricing in Luxembourg

Koen Roovers, who sits on the forum on behalf of Financial Transparency Coalition, said it’s unclear to what extent it influences EU or OECD policy.

But he noted that its internal deliberations should spend more time on ethical questions.

“There is a widespread belief there that [tax and transfer pricing] is only a technical discussion, whereas I see it as political”, he told this website.

The forum will meet again in late October.

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