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Juncker: No support for tax loopholes
The Commission president testifies on Luxleaks scandal.
European Commission President Jean-Claude Juncker told a special parliamentary committee Thursday that as prime minister of Luxembourg he had no role in the country’s creation of special loopholes for multinational corporations.
Juncker, along with Commissioners Margrethe Vestager and Pierre Moscovici, testified before the European Parliament’s ad-hoc panel on the so-called Luxleaks revelations, which appeared to show that Luxembourg had handed out hundreds of sweetheart tax deals allowing multinational companies such as HSBC, Heinz and Disney to minimize the tax they pay in the EU.
The story broke soon after Juncker took office as Commission president, and critics said that as prime minister he must have known about these arrangements, called “tax rulings.”
“I never gave instructions to Luxembourg tax authorities,” Juncker told the 45-member, cross-party special committee, which had been trying for months to get him to testify.
The commissioners all said they fully supported boosting tax compliance in Europe. Moscovici told MEPs that the Commission wanted to stir up a “revolution” of transparency, efficiency and simplicity in tax policies.
Vestager, the European commissioner for competition, is conducting her own investigation into tax-rulings. That probe was started by her predecessor as competition chief, Joaquín Almunia. At Thursday’s hearing Vestager declined to indicate when she would present a decision in the state-aid probes concerning the tax affairs of Apple, Amazon, Starbucks and Fiat Trade and Finance.
When she took office in November 2014, the commissioner had promised a decision before the summer, but later admitted that her services would not meet that deadline. Vestager also poured cold water on the idea presented by some MEPs that any illegal state aid the companies are ordered to pay back ought to go to into the EU budget.
“We see the limitations of state-aid control to have the money repaid back into the European budget,” she said. “It means that taxpayers should get their money back. At least into the state budget, to be used for something legitimate.”
Alain Lamassoure, the French center-right MEP who chairs the inquiry committee, told Vestager, “Through the state aid rules…you have contributed to creating and maintaining political pressure for the member states agree to put an end to these practices and arrive, eventually, at a harmonization of corporate taxation.”
The Commission in June proposed new corporate tax rules it said would make it tougher for multinational companies to take advantage of legal loopholes. Among them was an automatic exchange of information between member states regarding special tax rulings like the ones in Luxembourg.
The Parliament’s special committee, meanwhile, has no power to investigate. Instead it has toured several European countries holding a series of public hearings on tax rulings aimed at raising public awareness of the issue.
The panel has also issued a draft report calling on countries and the EU institutions to extend automatic exchange of information to all tax rulings, to “speed up” the prompt establishment of a compulsory EU-wide Common Consolidated Corporate Tax Base (CCCTB) and adopt an EU legislative framework to protect whistleblowers.
The CCCTB, which was first proposed by the Commission in 2011, offers “a single set of rules that cross-border companies could use to calculate their taxable profits in the EU,” instead of having to deal with different national systems. Negotiations on that plan stalled, however, because it was too ambitious in terms of consolidation of national rules, which many countries oppose.
Critics of the tax arrangements were unconvinced by Juncker’s testimony. Green MEP Sven Giegold, in a tweet, said the Commission president’s testimony was “Embarrassing & revealing” and argued that Juncker “said nothing of substance and expressed no regret for transforming Luxembourg into a tax haven!”
Juncker was originally supposed to appear before the panel earlier this summer. But the hearing was postponed because of the ongoing Greek financial crisis. Thursday’s meeting was also almost disrupted when the European Parliament scheduled a vote at the same time on the Commission’s migration proposal.