'Many other countries' involved in Luxembourg-style tax deals

Written by Julie Levy-Abegnoli on 18 November 2014 in Special Report
Special Report

Luxembourgish MEPs have rejected accusations that Luxembourg acted illegally and refused to let their country take the blame for practices they claim are widespread throughout Europe.

Following the 'Luxleaks' revelations, Luxembourg has been under attack from all sides, with members of parliament questioning what role commission president Jean-Claude Juncker may have played in the establishment of controversial tax agreements between the Luxembourgish government and multinational companies, at a time when he was prime minister.

Frank Engel (EPP) is a member of parliament's civil liberties, justice, and home affairs committee and an MEP for Luxembourg

'LuxLeaks' is not the first occasion on which Luxembourg has been singled out as a fiscally malignant place. Luxembourgish tax practices, and rulings in particular, have nothing illegal. Our rulings exist just as they do in 21 other member states - in some of which the scale of the practice is more impressive than in Luxembourg. The country is a relevant financial centre and must compete with other financial centres, within the EU and globally.

"Luxembourg has never blocked any European progress towards the principle of effective taxation everywhere - other member states have taken on that role" - Frank Engel

That said, Luxembourg has never blocked any European progress towards the principle of effective taxation everywhere - other member states have taken on that role, without advertising it too much. Common consolidated corporate tax base is just one of the issues where every Luxembourgish initiative was blocked by other member states in the past.

The question that Europe will have to answer, at some point, is this: do we want the headquarters of big multinational companies on our continent, with all the positive fallout as well, or do we want to leave them to the rest of the world? President Juncker presented his fiscal transparency initiative to the G20 in Brisbane, and was told off by our international partners.

So here is the point: there is global competition for corporate headquarters. If the EU decides it doesn't want to be an attractive place for them anymore, other countries will host them. If we got our act together and invented a fiscal setup in which Europe would remain attractive as corporate headquarters, and taxation, even based on rulings, would accrue to the European budget, we would remain on the corporate map. It's time for bold moves. I trust that Luxembourg will not be among those who will try to block them - again.

 

Mady Delvaux-Stehres (S&D) is a vice-chair of parliament's legal affairs committee and an MEP for Luxembourg

The practice of tax rulings is well established in 22 EU member states. There is no doubt that the set of rules governing tax rulings needs to be reviewed. It is objectionable that international companies pay little or no tax when at the same time citizens and small and medium sized enterprises face an increased tax burden.

"The bashing of only certain member states - often small countries - does not seem to be appropriate nor effective" - Mady Delvaux-Stehres

The commission's proposals go in the right direction. We also need quicker progress on the parent subsidiary directive. I hope for a fair, pragmatic and solution-oriented debate. The bashing of only certain member states - often small countries - does not seem to be appropriate nor effective.

 

Charles Goerens (ALDE) is a member of parliament's development committee and an MEP for Luxembourg

My country's authorities have once again, in the context of a recent debate that took place long before 5 November, said that they wanted to cooperate on matters of fiscal transparency with all states involved, both at OECD and EU level.

In order to underline the credibility of their intentions, the government and the Luxembourgish parliament adopted the automatic exchange of information on financial products. As a matter of fact, Jean-Claude Juncker's government had already announced plans to put an end to existing practices before the adoption of the automatic exchange of information.

Regarding analyses, comments, accusations and unjustified affirmations made in place of a country I know particularly well, there is something I would like to highlight. I would like to remind those who spoke of illegal practices and even of a violation of the treaty that they should clarify their remarks and clearly cite which legal and constitutional dispositions they believe Luxembourg to be in breach of. Had they done this, the European court of justice could have intervened.

"Either legal or constitutional principles have been violated - in which case we must see who did what - or this is simply a case of 'Luxembourg bashing'" - Charles Goerens

The debate must be centred on principles, and there are two options available to us. Either legal or constitutional principles have been violated - in which case we must see who did what - or this is simply a case of 'Luxembourg bashing'.

Other sources than those that fuelled the 'hurricane of tenderness' that hit Luxembourg reveal that anticipated fiscal decisions were taken in many other countries. Discretion cannot eclipse reality. One of our member states reportedly carried the same practices as Luxembourg, allowing businesses to save €6.7bn thanks to special tax treatment. Others have demonstrated a talent for fiscal engineering that rivals the practices that have already been revealed.

This is why we should let objectivity and transparency guide us. The same causes lead to the same effects. I would therefore like to ask those who have demanded that Juncker step down how they would treat his vice-president Frans Timmermans, who up until very recently occupied a very high responsibility government post in a country where tax rulings are apparently not an exotic commodity.

 

About the author

Julie Levy-Abegnoli is a journalist and editorial assistant for the Parliament Magazine

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