New report reveals role of Luxembourg in resisting EU wide efforts to tackle tax avoidance

A new report from the Greens in the European Parliament has revealed how Luxembourg sought to block measures to tackle tax avoidance while EU Commission President Jean-Claude Juncker was Prime Minister. Key findings include:

  • Luxembourg has been ‘fighting tooth and nail’ against an ambitious European Savings Tax Directive (EUSTD) proposal effectively turning the Grand Duchy into a tax haven.
  • While Jean-Claude Juncker was at the helm, Luxembourg resisted the automatic exchange of information with other EU countries, calling for a withholding tax instead.
  • By weakening and blocking European tax reforms in the 2000s, Luxembourg has been responsible for an estimated loss of tax revenue of more than $100 million in Luxembourg itself and $300 million in other EU states.
  • The resistance of three Member States – Luxembourg, Belgium and Austria – to the automatic exchange of information had a significant impact on compliance by non-European countries. Once preferential treatment was granted to some Member States, it was impossible to refuse it for non-European jurisdictions. This led to a long list of countries decided to opt-in for the withholding tax option including Andorra, British Virgin Islands, Guernsey, Isle of Man, Jersey, Liechtenstein, Monaco and Switzerland

As President Juncker prepares to address the European Parliament inquiry committee on money laundering, tax evasion and tax avoidance (PANA) Greens will demand he explain to what extent he was aware of Luxembourg’s shady tax practices. They also make a series of recommendations for improving full cooperation between tax administrations and exposing dodgy tax practices in European Member States.

Molly, who has been a member of the PANA committee of inquiry, said:

“This report shows just how important cooperation between EU member states is when it comes to tackling tax avoidance. It also demonstrates how the preferential treatment offered to some EU nations results not only in the loss of millions in tax revenue for member states but also has knock-on effects by encouraging countries outside the EU to use the same tactics and create tax havens.

“This is a warning sign for post-Brexit Britain. It shows how disastrous Tory plans on slashing tax rates and turning the UK into a tax haven would be. Turning our backs on cooperation with our European partners on tax affairs will send a signal to the rest of the world that competition on taxes and a race to the bottom is acceptable and avoiding taxes is OK.

“But is absolutely unacceptable; turning the UK into a tax haven will mean we lose the tax revenues that are so vital for funding vital public services. The UK needs to tighten up on tax avoidance and cooperate fully with European countries whether we are inside or outside the EU.

“The Green Party are placing a strong emphasis on tackling tax avoidance in our manifesto. We pledge to invest in more staff at HMRC so they can work more effectively and we will reinstate the higher level of corporation tax for large businesses.