EU’s Juncker releases secret ‘Luxleaks’ tax advice

Secret Luxembourg document discussed risks of special tax deals, but Jean-Claude Juncker says he cannot remember discussing it with its author

The president of the European Commission faces fresh questions about his role in designing Luxembourg’s controversial system of “sweetheart” tax deals after he released an 18-year old document that urged his government to monitor the system more closely.

Jean-Claude Juncker has published a missing page of a report published in 1997 by a government adviser that highlighted the potential consequences of Luxembourg, a country Mr Juncker ran for two decades, entering into bespoke tax deals with major corporations.

Just two weeks ago Mr Juncker told MEPs he did not know the page existed. Its author, meanwhile, has claimed Mr Juncker was given a copy at the time.

Today he insisted he could not remember discussing the report with its author in 1997, but nonetheless insisted he did not ask for the page to be withheld from the public.

Mr Juncker has always denied any role in the “sweetheart” tax deals, which are said to have helped hundreds of major multinational companies to cut billions from their tax bills by setting up small offices in the tiny state.

The tax rulings, which saw some businesses pay less than one per cent tax in the Grand Duchy, were entirely legal but have angered politicians from other European states who argue they deprived them of significant tax revenues.

The ‘Luxleaks’ disclosures – a set of accountants’ papers outlining the deals – led to calls for Mr Juncker to resign last year.

The page released today was omitted from a 239-page tax inquiry commissioned by Mr Juncker and published a few months after he started his 18-year period as Prime Minister. Its release was highly anticipated by MEPs investigating the affair, who likened it to a “state secret”.

The page gives advice on entering into tax competition with other states through bespoke tax rulings, and urges the government to monitor the deals closely to ensure they are in compliance with the government’s broader policy.

The missing page, released by Mr Juncker’s office, notes the “dialogue” between the tax authorities and companies. It acknowledges that they gave companies certainty, but also highlights that it put Luxembourg in “fiscal competition” with other states.

The document, written in French, warns that informal tax rulings do not “exist in our fiscal legislation” and may not be “consistent with the government’s policies.”

“To decide in advance the legitimate nature of an operation, means that the administration enters into fiscal competition with other European countries in which the practice of ‘ruling’ is widespread.”

“In a Europe where competition on a tax level reigns, the negative effect of offshoring is thus reinforced.

“With this in mind, it is appropriate to cite the Netherlands, a pilot country in the practice of ‘ruling’, which recently introduced innovative types of financing for groups to improve the fiscal climate for investment and to compete against attractive tax regimes on offer outside of the Netherlands.

“The rapporteur can see the pragmatic approach chosen by the tax bureau. It is recommended that the relevant ministers follows rather more closely the existing accords. From the moment that the government is clearly aware of these practices, it can intervene if the informal rules applied are no longer in accordance with government policy.”

The author, a former Luxembourg MP named Jeannot Krecke, has said he Mr Juncker one of only three unredacted copies of the report. He said he gave Mr Juncker a fresh copy this year as MEPs investigated the so-called “Luxleaks” scandal.

Mr Krecke has said he did not release the page originally as he deemed it too sensitive for public disclosure. “My decision was based on the fact that I did not find it appropriate to launch an international discussion on tax rulings during our presidency,” he has told MEPs.

Mr Juncker today said his recollection of his discussions with Mr Krecke was hazy, but denied misleading the European Parliament – having recently told MEPs he had no knowledge of the missing page.

In a letter to MEPs, he also insisted he did not ask Mr Krecke to remove the “secret” page, and said this was confirmed in a recent phone call.

“Mr Krecke, who I always esteemed highly both as reporting Member of Parliament and later as Minister of Economic Affairs, explained in several interviews that he would have discussed the matter with me in 1997, albeit briefly as he makes clear,” he said. “This process has not remained in my memory.”

“After 18 years, I cannot remember all related events that happened in this context in 1997. I know that memory lapses are often a comfortable evasive excuse. However, I reject the reproach that I have deliberately spoken untruthfully to the Committee of the European Parliament.”

In an appearance before MEPs earlier this month, Mr Juncker denied any role in creating Luxembourg’s tax regime, and denied knowledge of the page.

“I didn’t know this page existed. It is an interesting area to discuss, but I wasn’t aware of it,” he told MEPs investigating the affair.

“Actually, I don’t have that documentation in my cellar and I’m also not going to go in my cellar with you to go and look for it.”

He also told MEPs it would “exaggerate my political talent” to link him to Luxembourg’s position as a tax haven, saying he “never, never, never” instructed officials “to set in place any tax system”.

“I never gave instructions to Luxembourg tax authorities,” he told a hearing of MEPs. “I did not set up any system in Luxembourg in order to ensure there was avoidance in order to discriminate against other member states. I have always been against it, this idea. You exaggerate my political talent in that respect.”

“I have been in no way been in support of a tax administration in Luxembourg that would be of negative impact to other European countries.”

Critics pointed out Mr Juncker had boasted in speeches in the 2000s of having lured Silicon Valley giants to the country.

Fabio De Masi, an MEP investigating the affair, called for a full inquiry by the European Parliament into the affair.

“The missing page, while not revolutionary, makes clear that the Luxembourg system of attracting companies’ profits via a generous ruling practice has been in place since at least the 90s.

“The government, with Juncker at the top, has been warned about the consequences, and did nothing to prevent the excesses from going on.”

The European Commission – which Mr Juncker runs – is examining the deals as part of a broader inquiry into whether taxpolicies broke state aid rules.

Mr Juncker was Prime Minister of the country of half a million people from 1995 to 2013, as well as finance minister from 1989 to 2009 – an era when it was shifting rapidly from a declining former steel-producing country into a major financial centre that offered ultra-low taxes to corporations.

He has since launched a new initiative to increase EU-wide tax transparency.