Wednesday, December 10, 2014

Luxembourg Vowes to Rein in Sweetheart Tax Deals for Multinational Companies

Newspaper front pages.We originally posted on November 17, 2014, Luxemburg Leaks’ causes ‘Tax storm’ of government, media response
Public officials across the globe reacted with swift condemnation and calls for reform following ICIJ’s investigation into secret tax deals between Luxembourg and hundreds of international corporations.
The New York Times said the revelations have sparked a “rising furor” in Europe. Reuters called the reaction a “tax storm.” Response has been especially intense in Brussels, where the European Commission has been seeking to eliminate tax havens within the European Union.

Reporting by ICIJ and its partners was based on a leak of 548 private tax rulings – also known as “comfort letters” – negotiated by accounting giant PricewaterhouseCoopers on behalf of more than 340 multinational corporations. The documents provided a road map into how corporations shave billions of dollars in taxes by routing profits through Luxembourg. 

To see more about the latest impacts and responses link to ICIJ.

Now the Luxembourg’s government is on alert for a new wave of tax revelations that Prime Minister Xavier Bettel expects to hit the country in the coming days.

According to Bloomberg The country’s Finance Minister Pierre Gramegna received a new batch of questions from a group of investigative reporters that indicate more documents revealing alleged sweetheart tax deals with multinational companies will be published next week, Bettel told journalists in Luxembourg today.

“It’s clear that we can count on a new round of revelations,” Bettel said. “We are of course continuing to look at this internally and preparing our response.”

Bettel, who took over from Juncker as Luxembourg prime minister last year, said today this time “a smaller number of tax rulings” should be revealed and that he has no certainty yet what exactly will be published next week.
“Promising contacts” with and “other international players” happened partly because of “a favorable tax environment that we have created here in Luxembourg,” Juncker said then. Luxembourg, with a population of just under 550,000, is among countries being probed by the Brussels-based commission for tax deals that may have violated the 28-nation bloc’s state-aid rules. Firms named so far include Amazon and Fiat Finance & Trade in Luxembourg, Starbucks Corp. in the Netherlands and Apple Inc. (AAPL) in Ireland.

New EU Competition Commissioner Margrethe Vestager, a former economy minister of Denmark, has said that while “tax rulings as such” are a common practice, they may be illegal if authorities “accept that a tax base of a specific company is calculated in a favorable way.”

As a result of this publicity and pressure from the EU, Luxembourg vowed to rein in sweetheart tax deals for multinational companies after its reputation received another blow from a new wave of leaks revealing fiscal accords, that according to Bloomberg.

The nation’s Finance Ministry is pushing to set up oversight of so-called tax rulings next month as Prime Minister Xavier Bettel promised that Luxembourg is doing all it can to clean up its “damaged image.”

The “legitimacy of certain mechanisms, which are compliant with international and national law, can be put in doubt from an ethical point of view,” the finance ministry said today. “What is currently an administrative practice will be anchored in law.”

A European Union state-aid probe into agreements with Inc. and the revelation of thousands of pages of leaked secret tax deals with companies from around the world have shaken Luxembourg, whose population of about 550,000 enjoys the highest income per capita of any EU nation. Finance Minister Pierre Gramegna last month described the leaks as a “tsunami.”

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