Juncker’s Luxembourg marketed tax avoidance

Maybe it’s just my jaundiced vision, but I don’t see the European Commission as being any repository for ethics or good behaviour.

Of course Luxembourg’s economy is dominated by its banking sector. In global competition it depends on its banks and financial institutions having a competitive advantage over other countries. And it now becomes clear that the country’s government did as much as they could to ensure that the country’s laws allowed these institutions to market and exercise this advantage.

Jean-Claude Juncker

Jean-Claude Juncker

It has now been revealed that Luxembourg, its government, its bureaucrats and its institutions have actively marketed their “tax avoidance” services to at least 340 major companies. Much of this was during the time that Jean-Claude Juncker was Prime Minister of Luxembourg between 1995 and 2013. This is the same high-living Juncker who is the new President of the European Commission and declared 3 months ago that he would “try to put some morality, some ethics, into the European tax landscape.”  Juncker lives up to my low expectations of EU mandarins.

Of course tax avoidance is legal and not tax evasion. I have little sympathy for politicians who blame corporations for taking advantage of the rules they themselves make to minimise their tax payments. Any corporation would be failing in its fiduciary duties if it did not legally try to minimise its tax burden. For that matter any individual who for want of being familiar with the rules, payed more tax than he had to – even if it was for philanthropic reasons – would be just a fool.

(This has nothing to do with my view that taxes based on wealth generation are fundamentally counter-productive and should instead be based on wealth consumption or destruction).

The Guardian:

A cache of almost 28,000 pages of leaked tax agreements, returns and other sensitive papers relating to over 1,000 businesses paints a damning picture of an EU state which is quietly rubber-stamping tax avoidance on an industrial scale.

The documents show that major companies — including drugs group Shire, City trading firm Icap and vacuum cleaner firm Dyson, who are headquartered in the UK or Ireland — have used complex webs of internal loans and interest payments which have slashed the companies’ tax bills. These arrangements, signed off by the Grand Duchy, are perfectly legal.

The documents also show how some 340 companies from around the world arranged specially-designed corporate structures with the Luxembourg authorities. The businesses include corporations such as Pepsi, Ikea, Accenture, Burberry, Procter & Gamble, Heinz, JP Morgan and FedEx. Leaked papers relating to the Coach handbag firm, drugs group Abbott Laboratories, Amazon, Deutsche Bank and Australian financial group Macquarie are also included. …….. 

……. The revelations will be embarrassing for the new president of the European Commission, Jean-Claude Juncker, who was prime minister of Luxembourg between 1995 and 2013. In a speech in Brussels in July, Juncker promised to “try to put some morality, some ethics, into the European tax landscape.” He has insisted that the country is not a tax haven.

Pressure is already building on Luxembourg after the European Commission launched a formal investigation into whether Amazon’s tax arrangements in the Grand Duchy amount to unfair state aid. The Luxembourg tax arrangements of Italian carmaker Fiat’s finance unit are also under official scrutiny by Brussels.

Asked recently if such a crackdown risked damaging the economy of Luxembourg, one senior figure closely involved in the G20 reform programme said: “I don’t care. It is like saying: ‘If you fight drugs there will be no jobs in certain parts of Mexico.’” …… 


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