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Luxembourg fights back, rubbishes tax haven allegations

Luxembourg, with a population of about 500,000, is already one of the countries under investigation by the European Commission

Bloomberg Brussels/ Berlin
Luxembourg fought back after a report revealed details of hundreds of secret tax deals with multinational companies and Germany's finance minister said the nation has work to do on complying with global standards.

Luxembourg's government called an emergency press conference with Prime Minister Xavier Bettel and Finance Minister Pierre Gramegna after the disclosure of tax rulings bestowing low-tax status.

"These rulings, as they have been done in Luxembourg, are in line with international and national rules," Bettel told reporters in Luxembourg on Thursday. Gramegna said the procedure "is not something that's particular to Luxembourg. It exists in a lot of countries." More than 340 companies have transferred profits to Luxembourg using complicated tax arrangements, according to leaked documents obtained by the International Consortium of Investigative Journalists. The report, which reviewed almost 28,000 documents and identifies companies such as PepsiCo Inc, Ikea Group and FedEx Corp, said some corporations effectively lowered their tax bill to less than 1 per cent of profit.
 

Luxembourg, with a population of about 500,000, is already one of the countries under investigation by the European Commission, the EU's executive body, in a probe into whether unfair tax deals violated the 28-nation bloc's rules on state aid.

Firms named so far include Amazon.com Inc. and Fiat Finance & Trade in Luxembourg, Starbucks Corp. in the Netherlands and Apple Inc. in Ireland.

'Very Serene'

Jean-Claude Juncker, Luxembourg's prime minister for almost 19 years who took over as commission president on Nov. 1, "is very serene" following the reports, Margaritis Schinas, a spokesman for the commission, said in Brussels today.

Juncker told reporters yesterday he will not interfere in the work by Antitrust Commissioner Margrethe Vestager.

"The commission will do its work -- I will not get involved in this. It's the duty of the competition commissioner, who must be given great freedom of action," Juncker said.

Gramegna said the commission considers tax rulings in general "in line with European rules" and a policy "that gives companies an assurance and predictability.

''In that sense, the commission finds this is a positive thing,'' he said.

Bettel, who took over from Juncker as Luxembourg prime minister last year, said he was ''of course not happy about the image that's being circulated'' about his country.

Global Standards

The ICIJ project was also reported by news organisations including The Guardian, Sueddeutsche Zeitung and Le Monde.

German Finance Minister Wolfgang Schaeuble said Luxembourg has ''a lot to do'' to meet global tax standards after details of the the report emerged.

Addressing German lawmakers in Berlin today, Schaeuble cited global efforts to combat tax avoidance by companies and an international accord on Oct. 29 for countries to automatically share income-tax data.

''There's not only illegal tax evasion, but also the establishment of legal frameworks,'' Schaeuble said. ''That's our next step.'' While seeking to uncover tax hideouts across the world, the Organization for Economic Cooperation and Development and partner countries are also working on data exchange to combat tax-avoidance strategies used by companies such as Google Inc., Apple Inc. and Yahoo! Inc. Multinational companies hold an estimated $2 trillion in low-tax jurisdictions, OECD Secretary- General Angel Gurria has said.

Amid this global push to fight against tax evasion and tax fraud, Luxembourg last year decided to abandon its long practice of offering bank secrecy and witch to a system of automatic exchange of tax information from Jan. 1, 2015.

''We have worked a lot already in the last few months,'' said Gramegna. ''Luxembourg can't be criticised for abiding by the law. It's not as if Luxembourg was doing rulings alone, but this is done as part of a wider network of countries."

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First Published: Nov 07 2014 | 12:08 AM IST

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