Juncker launches tax fightback

European Commission president denies that he encouraged tax avoidance.

Jean-Claude Juncker has launched the first policy initiative of his presidency of the European Commission in a bid to counter accusations that as prime minister of Luxembourg he had been complicit in helping multinational companies to avoid tax.

At only the second meeting of the new college of commissioners, Juncker yesterday (12 November) instructed Pierre Moscovici, the European commissioner for economic affairs and taxation, to prepare a proposal that would require member states to share information on all tax rulings that they strike with multinational companies.

This departure from the Commission’s agenda, which was supposed to discuss the Commission’s future work programme, followed days of intensifying criticism of the president. He had remained largely out of the public eye since the publication last Thursday (6 November) of leaked papers from a Luxembourg accountancy practice, but emerged yesterday (12 November) to make defiant unscheduled appearances at a Commission press conference and at the European Parliament.

He said that tax deals struck between Luxembourg and multinationals during his time as the country’s prime minister and finance minister conflicted with norms elsewhere and so could appear unethical and contrary to notions of tax justice.

“I am politically responsible for all that happened,” said Juncker. But he went on to describe the deals, which guaranteed tax rates of as low as 1% in some instances, as “the logic of the non-harmonisation” of tax rules within the EU.

Juncker admitted that it had been a “mistake” not to answer questions on the revelations sooner. The publication of hundreds of confidential tax agreements between the Luxembourg tax authority and multinationals had sparked outcry and led critics to question his suitability to lead the Commission, though EU member states have long been aware of Luxembourg’s efforts to use its tax system to lure companies from elsewhere in the EU. Pascal Saint-Amans, the director of the OECD’s centre for tax policy and administration, said that the publication of ‘Lux leaks’ had revealed little that was not already known.

Margrethe Vestager, the European commissioner for competition, appearing before the Parliament’s economic and monetary affairs committee on Tuesday evening (11 November), was supposed to be discussing stress-tests for banks, but met a barrage of questions about state-aid investigations into corporate tax arrangements, with MEPs complaining about Juncker’s record in Luxembourg.

Tomorrow (14 November), Vestager will publish a decision outlining charges that a tax deal between the Netherlands and Starbucks broke EU state aid rules. The expurgated text, with sensitive business numbers removed, will be examined for what it reveals about the Commission’s approach to such cases. “It is an important step, as it encapsulates the Commission’s provisional position,” said José Luis Buendia, a partner with Garrigues. “The Commission has not really gone into these tax rulings issues before.”

Luxembourg is currently resisting publication on confidentiality grounds of a separate decision, in which the Commission accuses Luxembourg of breaching state aid rules in a tax deal with Amazon.

The Commission has already published its decisions on cases concerning Apple in Ireland and Fiat Finance and Trade in Luxembourg.
In June, the Commission threatened to take Luxembourg to court, alleging that it refused to co-operate with the Commission’s probes into its tax affairs.

Vestager was asked by an MEP whether it was true that Luxembourg’s compliance had improved since Juncker left office. She confirmed that the Commission had experienced “an improved co-operation”. “I have not been doing any guesswork as to why, but I am just very pleased that it happened,” she said.

The Commission president will this weekend (15-16 November) be in Australia, attending meetings of the heads of government from the world’s 20 leading economies – the G20 – at which tax issues will figure prominently. Juncker, who will be accompanied by Moscovici and by Herman Van Rompuy, the president of the European Council, said that the Commission would push for world leaders to include a commitment to exchange tax rulings. G20 leaders are expected to back a new standard developed by the OECD on taxing multinationals, in particular the practices of base erosion and profit shifting (BEPS).

 

 

 

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