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Why has the European Commission not investigated Lux Leaks tax deals?
Almost five years ago, the International Consortium of Investigative Journalists published its Lux Leaks investigation, exposing how some of the world’s largest corporations cycled billions of dollars through Luxembourg so as to avoid paying huge amounts of tax — taxes that otherwise could have ended up in the coffers of other European countries.
In several cases, the deals — known as “tax rulings” — allowed firms to pay less than 1 percent tax in Luxembourg.
The EU’s second smallest member state was secretly offering huge tax favors on an industrial scale. In some instances, leaked documents showed officials even granted lucrative tax deductions for “deemed interest” — that is, pretend payments of interest on loans that, in reality, were interest-free.
In 2014, there were immediate calls for the European Union’s then-new competition commissioner Margrethe Vestager to take action.
If Luxembourg’s tax rulings were found to offer benefits to preferred companies then Vestager could use EU competition law — which bars countries from giving state aid to favored businesses — to reverse these deals and force multinationals to make up years of tax underpayment.
But Vestager declined immediate action.
“We consider the Luxembourg-leaked documents as market information,” she told reporters in November 2014. “We will examine it and evaluate whether or not this will lead to the opening of new cases.”
Now time is running out. The current Commission is coming to the end of its five-year term, and Vestager remains silent. Why?
Certainly, the Lux Leaks scandal was an uncomfortable episode for her boss, Commission president Jean-Claude Juncker. He had previously served as Luxembourg prime minister for almost two decades, the time period in which his officials approved the Lux Leaks tax deals.
In the UK, Margaret Hodge, a member of the British parliament and a prominent tax campaigner, asked: “How can we know he’s working in the interest of Europe when, as prime minister in Luxembourg, he has exploited populations in every European country and elsewhere for decades?”
Many skeptics asked the same question. But Juncker faced down the barrage of criticism, comfortably surviving a no-confidence vote in the European Parliament — and even repositioning himself as a champion of tax reform.
“I have said the Commission will fight … tax avoidance,” he emphasized. “I would like everyone to understand this is not just words for the sake of words. This very much forms part of the Commission’s intentions.”
In particular, he pointed to the work of Vestager’s department, which a year before his arrival had already begun enforcement actions focused on tax avoidance by multinationals active not just in Luxembourg but in other avoidance-friendly EU countries, too.
Confidential tax rulings awarded to Apple, Starbucks, Fiat and Amazon were already under investigation. And after the Lux Leaks scandal, Vestager launched further probes concerning IKEA, French electricity firm Engie and Nike — the last of these in response to ICIJ’s Paradise Papers reporting on the sportswear maker’s use of the Netherlands to avoid taxes.
Many of the firms targeted were not happy. For Nike, Vestager’s investigation was “without merit,” while Apple chief executive Tim Cook said her action on the iPhone maker’s taxes amounted to “total political crap.”
Last summer, U.S. President Donald Trump weighed in, too. He reportedly told Juncker: “Your tax lady, she really hates the U.S.” — an apparent reference to the fact that several of Vestager’s investigations had centered on American-headquartered multinationals.
In Europe, these outbursts did nothing but help Juncker, allowing him to shed his image as a friend of tax-avoiding multinationals.
But despite public clashes, the fact remains: the Juncker Commission has failed to investigate a single Lux Leaks tax ruling since their revelation by ICIJ four and a half years ago.
And while the Commission has been hesitant, prosecutors in Luxembourg have not. They discovered the identity of two Lux Leaks whistleblowers — former PriceWaterhouseCoopers workers Antoine Deltour and Raphael Halet — and spent years pursuing criminal charges against them, along with French journalist and ICIJ member Edouard Perrin.
Deltour and Perrin were eventually acquitted, but Halet’s case continues.
“I think everyone should thank both the whistleblower and the investigative journalists,” Vestager said in a 2016 interview as court proceedings dragged on. Nevertheless, she declined to a request to appear as a defense witness.
The EU is currently debating a new directive that would broaden protections for whistleblowers, ensuring they cover cases such as the Lux Leaks affair. Attempts to prosecute Deltour and Halet exposed how vulnerable those following their consciences can be without legal protections.
In court, prosecutors had argued the two men were not true whistleblowers because their leaked information had failed to expose behavior that was illegal.
This has been Juncker’s argument, too. He has declined to go into details — claiming his role as Commission president prevents it, or accusing journalists of “offensive questions” — but he has generally denied any illegality.
“Fiscal law was always respected. No illegal practice is known to me,” he told the European parliament. “Everything that was done was in compliance with national legislation and international rules that apply,” he told reporters.
In any case, he added, Vestager would be under no pressure from him to duck cases from the Lux Leaks files. “I am not going to be talking to Ms. Vestager about these issues that have arisen in Luxembourg,” he said. “If I were to be seen as exerting undue influence the result would be a massive loss of my authority as president of the Commission, and I certainly wish to avoid that.”
Vestager has undoubtedly shown herself braver than most politicians in facing up to powerful corporate interests. But still, she hasn’t acted on Lux Leaks.
Her Social Liberal Party is out of power in Denmark, meaning she is unlikely to be sent back to the Commission for a second term. If Vestager is to act at all, it must be soon.
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With an avg. 1.2M voters per MEP & Britain with 16% of EU GDP and 13% of the EU’s population yet having only 8% (if united) say, whilst holding less than 3% of the various offices within the EU Do note The EUropean Parliament has no ability to make policy and has a Commission of unelected bureaucrats, thus clearly the EU is not even a pretence of being a democracy despite its protestations!Do note that many senior apparatchicks and even elected politicians speak openly of the ‘Post Democratic era’ with no sense of shame or irony and in complete contempt of the so called electorate – yet The EU & many of its vassal States/Regions are all too willing to slaughter people in Sovereign States, to impose The EU’s chosen brand of democracy on them!
Now as President Junker announced in his ‘State of the union’ speech 2017 the aim is to create an EU military force and centralise ever more of the decision making and control!
The imposition of a Government and policies upon its vassal regions such as the peoples of Greece shows just how far from being a democracy the EU is.
Just follow the recent EU display of so called ‘Democracy’:
France and the Netherlands voted against the proposed EU constitution in 2005, only to have those votes ignored.
Ireland voted against ratifying the Lisbon treaty in 2008, but then later under pressure & threats had to change its mind.
Greece for me was the final straw. It became clear in 2015 that it didn’t matter which way the Greek people voted. The birthplace of democracy had become its tomb. That was enough. I was going to vote to leave the EU when the chance came.
No political party of any significance in Britain took active steps to achieve a Referendum – the task was eventually taken by an Indipendent West Midlands MEP Nikki Sinclaire who personally launched and funded the gathering of a petition of 225,000 signatures delivered to Parliament via Downing Street, thus forcing a debate in the House of Commons on an IN/OUT Referendum, which led to David Cameron’s first consequential rebellion.
It was due to winning that debate, officially opposed by every party including Ukip that David Cameron was forced to include a promise of an IN/OUT Referendum in the Tory Manifesto at the next General Election. The rest is history & despite no Parliamentary Party backing the OUT vote & Government spending Millions of Pounds of public money leafletting & promoting ‘Project Fear’ to try to persuade the British people to Remain just as they had at the first Referendum in 1975 – This time their lies and threats were not heeded and in the largest vote in British history Britain voted by a clear majority to Leave.
Nikki Sinclaire’s OUT result left Cameron & his co conspirator Osborne with no option but to resign, sadly some of the other traitors have remained to try to hinder progress to BreXit, aided by their corrupt allies in the EU and \eu funding and bribes!
There will be little or no change in Britain’s economic position, if we leave the EU, using a better negotiated, customised & updated version of the ‘Norway Model’ as a stepping stone to becoming a full member of the Eropean Economic Area, where all will benefit, as we secure trade relations with the EU’s vassal regions, with an EFTA style status and can trade and negotiate independently on the global stage, as members of The Commonwealth and the Anglosphere.
This is of course dependent on a modicum of intelligence on the part of Britain’s politicians and negotiators but it also requires the integrity of Parliament to uphod democracy and the integrity of EU politicuians & apparchicks to act ethically and without their normal vindictive mallice.
I believe Leaving the EU will be turned into something of a rough ride by the ignorant and the corrupt but I have no doubt that in the long run Leaving the EU will prove conclusively to be in the best interests of Britain and our true allies. I also believe that Britain leaving the EU will prove to be the catalyst to great changes within the EU and hopefully its democratisation as without great changes it is indubitably doomed.
Do not overlook the fact that politicians have plotted and schemmed since the 1950s and we have actually been vassals of the EU, when it was still using the aesopian linguistics and calling itself The Common Market in the early 1970s, a name the bureaucrats arbitrarily changed to EUropean Union in the early 1990s as they worked towards their long term goals of an ever closer centrally controlled Political and economic Union with its own anthem, currency, flag and rigid central control by its self appointed bureacrats towards a new Empirate –
It will take many years to rectify the mess our political class got us into and we have no other peacefull means by which to extricate ourselves than to depend on that self same self styled elite, who all too often forget they work for us!
One huge benefit of BreXit will be that we can negotiate with bodies like the WTO, UN, WHO, IMF, CODEX and the like, directly, in our own interest and that of our partners around the world, in both the Commonwealth and the Anglosphere at large; rather than having negotiations and terms imposed by unelected EU bureacrats and their interpretation of the rules handed down, as if they were some great achievement of the EU’s!The greatest change and benefit will be political, as we improve our democracy and self determination, with the ability to deselect and elect our own Government, with an improved Westminster structure, see >Harrogate Agenda<.
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