European Union set to launch investigation
The European Commission has begun pressing The Grand Duchy of Luxembourg on the topic of tax havens. A tax haven, as described by the International Consortium of Investigative Journalists, is a country where accountants and multinational corporations come to agreements that cut tax rates drastically.
Luxembourg has reportedly become quite the tax haven, with hundreds of large corporations, like IKEA and Fiat, running their money through subsidiaries and tax deals to avoid paying out large numbers of taxes in other countries. The investigation is being led by European Union Competition Commissioner Margrethe Vestager, looking to enforce the rules, as is the duty of the European Commission.
The reason for this appointment of responsibilities most likely lies in the fact that the current Commissioner of the European Union is the former Prime Minister of Luxembourg, Jean-Claude Juncker. Many of the deals that are being investigated occurred while Juncker was in office; as such, the Commission determined to appoint someone else to head up the scrutiny.
“I will not stand in the way — that would be unacceptable,” said Juncker when asked about the investigation into the Luxembourg tax cases. “I have some ideas on the topic, but I will keep my counsel.”
Some question how Juncker came to be the Commissioner in the first place. During his nearly two decades as Prime Minister of Luxembourg, Juncker oversaw the transformation of his country, once based in farming and steel production, into a low-tax hub for banking and insurance, with one of the highest per capita incomes of any developed country.
The government of Luxembourg, and more specifically the Finance Minister, has publically stated that they are not the only country in the European Union that has these “laws,” and that everything they are doing is completely legal.
The investigation commenced when the International Consortium began looking into the tax breaks and money flows of Amazon – the online shopping giant – when documents were leaked about the company. This investigation eventually widened to include nearly 300 companies that run money through Luxembourg as thousands of documents began to surface.
“The investigation will allow the commission to conclude that no special tax treatment or benefits have been granted to Amazon,” said the Luxembourg finance ministry in response to the beginning of the investigation. The ministry noted that reports of so-called state aid were unfounded in the cases of Amazon and other companies that operate in the country.
The Consortium noted that the documents obtained revealed deals negotiated by PricewaterhouseCoopers, an accounting firm, on behalf of hundreds of corporate clients.
“It’s unclear whether any of these documents are among those still being sought by E.U. investigators,” the Consortium wrote in an article, “but they are the kinds of documents that go to the heart of the E.U.’s investigation into Luxembourg’s tax rulings.”
The Commission has called a meeting between the finance representatives of all 28 EU countries and will be discussing tax breaks and laws, as well as what this could mean for Europe’s future on a whole.