In an article from January 1, British newspaper The Guardian says EU Commission President Juncker, former Prime Minister of Luxembourg, blocked EU efforts to tackle tax avoidance. The newspaper is basing this on confidential German diplomatic cables, received by German radio group NDR.
The cables are supposedly related to the work in the “code of conduct working-group” of the Council of the EU, created back in 1998 by Ecofin. According to the Council, the code of conduct “requires the commitment of member states to abolish existing tax measures that constitute harmful tax competition; and refrain from introducing new ones in the future”. The working-group “mainly deals with assessing the tax measures which fall within the scope of the code of conduct for business taxation and overseeing the provision of information on those measures”.
This working-group mainly works behind closed doors and based on consensus decision-making, which is the reason why little is known about the details of its work and it can’t adopt measures that are being opposed by a Member State (unless this specific Member State is the target of a measure).
According to The Guardian, the German diplomatic cables reveal how Luxembourg and other countries, especially the Netherlands, had been blocking efforts to harmonise tax legislation across the EU in order to protect their own tax regimes.
Under Juncker, who was Prime Minister of Luxembourg during most of the 18 years since the creation of the working-group, the Grand Duchy became one of the most important financial hubs in the world.
In light of the general perception of Luxembourg as a tax haven and the Luxleaks scandal putting the country’s tax ruling practices under scrutiny, these allegations however don’t seem to bear much news. It is however an embarrassing revelation for Juncker who, as EU Commission President, has announced he is leading the fight against tax avoidance and tax evasion.
The Guardian also refers to the policy changes Luxembourg has been making since the Bettel-Government took office, citing sources that the country had been working constructively towards more transparency and a more effective tackling of tax avoidance.
Still, today’s government sees itself facing criticism. Especially the reform of the working-group itself is allegedly being blocked by the Grand Duchy.
Bigger countries proposed among other things to get rid of the consensus decision-making, a big tradition in European decision-making. Luxembourg and other smaller Member States oppose this measure. The reform discussions have now been pushed back to the end of 2017.