Luxembourg tax files: Juncker admits position weakened by scandal
Jean-Claude Juncker breaks silence to say revelations are personally damaging as calls increase for harmonisation of EU tax rules
European Commission president Jean-Claude Juncker has admitted that his position has been weakened by a scandal exposing Luxembourg’s role in corporate tax avoidance schemes.
Juncker survived a no-confidence vote in the European Parliament last month following revelations that companies such as Shire and Icap engaged in legal manoeuvres to reduce their tax bills by channelling money through Luxembourg while he was finance minister and prime minister of the Grand Duchy.
Since the names of more multinationals including Disney emerged this week – suggesting Luxembourg encouraged industrial scale tax avoidance – Juncker has been struggling to keep a distance from the scandal.
In an interview with the French left-leaning daily newspaper Libération in the wake of the latest revelations, he broke his silence to admit it was personally damaging.
“Subjectively speaking, I’ve nothing to blame myself for any more than others have, and I should add that European governments have said nothing following these articles. But, objectively speaking, I am weakened because LuxLeaks suggests that I took part in operations that did not follow basic ethical and moral rules.
“There are many doubts in the minds of numerous Europeans and I’m profoundly sad about that,” Juncker told Libération.
Juncker said that in 1997 he tried to ensure that a code of good conduct “against harmful tax competition” was adopted by the European Council of Finance Ministers. He said: “I tried to go further by proposing a binding directive, but certain countries opposed it.”
He added: “I don’t think I should be treated in isolation, detached from the actions of others. This is not a noble excuse, but everyone was at fault because we did not react to the disparity between national fiscal norms that allow multinational societies to find a darkroom. The fight against tax evasion and fraud are among my 10 priorities since my election campaign: so it’s not following the LuxLeaks revelations that I have suddenly discovered the need for action. Then my sincerity was believed, now people believe me less, but I will prove that those who believe in me are right.”
Acknowledging that “the atmosphere” has changed with regard to taxation, he said: “Public opinion and especially the victims of austere or rigorous policies no longer accept, and rightly so, the nonchalance with which other actors in economic and social life are treated.
“As governments now claim that we must fight against evasion and tax fraud, I trust that nobody will be opposed to the adoption of tools that allow us to do what we say. A directive on the automatic exchange of information on planned tax rulings will be presented during the first half of 2015. We will see who objects to it.”
The latest leak of secret tax documents, obtained by the International Consortium of Investigative Journalists, details the tax affairs of Koch Industries – the second largest privately owned business in America – and FTSE 100 group Reckitt Benckiser.
The European Commission is also looking at the legality of tax deals offered to some multinationals in countries including Luxembourg, the Netherlands and Ireland. The scandal has boosted calls for greater harmonisation of tax rules throughout the European Union.
