14th November 2014

Politics: EC President Juncker responds to LuxLeaks, proposes more tax harmonization

Following last week´s revelations by the international consortium of investigative journalists about secret tax deals between Luxembourg and big multinationals, Commission President and former Luxembourgish PM and finance minister Jean-Claude Juncker faced MEPs´ and journalists´ questions on the matter. Mr Juncker´s situation is particularly delicate – he took control of the EU´s executive only recently and this case undermines his political image. Also, the EU has long pushed for a more effective fight against tax evasion, mostly by big multinationals, and Mr Juncker is supposed to be one of the faces of this fight. Under the Luxembourgish law, the Grand Duchy´s tax administration can issue so-called comfort letters to companies, stating that their tax arrangements are in line with the legislation. However, thanks to very creative tax arrangements, Luxembourg de facto approved effective corporate tax rate of only 0.25% for some big enterprises. Mr Juncker stressed that every action taken by the tax administration, which is in fact totally autonomous in Luxembourg, was in line with national legislation and international standards. Despite that, he added, tax evasion may have occurred and as prime minister, he was politically responsible. But the new Commission President did not stop here – he added that all this was possible only because of the lack of tax harmonization inside the EU bloc. He therefore stressed the importance of adopting the corporate tax base directive and announced the preparation of an obligatory automatized sharing of tax rulings information.

Members of the American Chamber of Commerce in the Czech Republic