Over the last week or so a controversy has been brewing involving Luxembourg and the tax games it has allowed multinational corporations to play by setting up paper subsidiaries in that country.
The background of this is that someone leaked Luxembourg tax rulings obtained by some 340 multinational companies to the International Consortium of Investigative Journalists, which has posted the rulings on its website. The leak has created a storm of controversy, with officials from around the world vowing to take action to prevent tax avoidance through the use of Luxembourg as a tax haven.
Attention has focused on Jean-Claude Juncker, who is the current President of the European Commission and who, prior to assuming that post this year, had been either Prime Minister or Finance Minister of Luxembourg for over two decades.` Here is the latest from the Irish Times:
European Commission president, Luxembourg’s Jean-Claude Juncker, took political responsibility for his country’s tax practices on Wednesday, saying he would fight tax evasion with more automatic exchange of information between countries.Please.
Juncker ( 59), who was the tiny Grand Duchy’s finance minister or prime minister for 24 years until the end of last year, has avoided the media since a network of investigative journalists reported last week that Luxembourg had granted sweetheart deals to some 340 multinationals allowing them to avoid billions of euros in tax.
The revelations put him under intense pressure to make clear his position on the tax deals and raised questions about whether they create a conflict of interest for him as commission chief.
“I am politically responsible for what happened in each and every corner and quarter (of Luxembourg),” he said, adding that while in line with Luxembourg and European laws, the tax practices may not have been ethical.
“It is true that sometimes when it comes to the application of different tax rules that are sometimes diametrically opposed that can lead to results that are not in line with ethical and moral standards that are generally applicable,” Mr Juncker said.
He explained that tax authorities in Luxembourg were independent of the government, but took political responsibility for the policies, which he said were a result of different tax regimes in EU countries.
“I am not the architect of what you could call the Luxembourgish problem,” Mr Juncker told reporters in a surprise appearance at a daily briefing of the European Commission.
“There is nothing in my past indicating that my ambition was to organise tax evasion in Europe,” he said.
The European Commission is investigating several tax schemes offered by Luxembourg to large multinational corporations to see if they broke EU laws on state aid.
“Everything that has been done has been in compliance with national legislation and international rules that apply in this matter,” Mr Juncker said.
“This state of affairs is due to the fact that we have to deal with the outcome of different standards. If there is no tax harmonisation throughout Europe ... then this can be the result.”
This kind of stuff has been going on for decades. I know - I worked for years in the international tax group of one of the Big 4 firms (left there 10 years ago). And it's not just Luxembourg. The Netherlands is notorious for issuing these kinds of rulings. So is Switzerland. All of these countries engage in this sort of practice. And the idea that they are doing it for reasons other than facilitating tax avoidance is just ludicrous.
As for the lack of tax harmonization in Europe, that is a feature, not a bug.
Everybody who is involved in tax administration, particularly when it involves multinationals, knows this kind of stuff is happening. The idea that it is some big secret is hilarious.
Hahahahahahaha! I'm having trouble getting myself up of the floor I'm laughing so hard.
As near as I can tell, this has nothing to do with countries being concerned about tax reduction schemes being carried out by multinationals. It has everything to do with politics. It's been clear from the outset that certain countries in the EU (namely the United Kingdom, but I'm sure there are others) were opposed to Juncker's elevation to EC president. My guess is that this is a deliberate attempt to delegitimize him.
The real question is whether the fact that these kinds of arrangements are now becoming headlines will result in any real change in the way multinationals are taxed.
I seriously doubt it.
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