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02/12/2016

Commission spokesperson dodges awkward questions on tax evasion, while Juncker dodges the press

Euro & Finance

Commission spokesperson dodges awkward questions on tax evasion, while Juncker dodges the press

Jean-Claude Juncker [European Commission]

To the frustration of Brussels correspondents, on Thursday (6 November), chief Commission spokesperson Margaritis Schinas declined to comment on the latest revelation of secret tax deals between more than 300 international companies and Luxembourg on behalf of the current Commission President and former Luxembourg prime minister, Jean-Claude Juncker.  

In the absence of Juncker himself at the EU executive’s midday press briefing, Schinas played down the importance of the leaked documents by the International Consortium of Investigative Journalists (ICIJ) which reveal that companies might have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes via special tax evasion schemes.

“The rules of state aid schemes are well-known. This is part of member states’ efforts to stimulate their economies and they will continue to do so. The Commission’s role is to make sure that all these schemes are investigated and the rules of the Treaty applied,” Schinas said.

The spokesperson added that the Commission is already acting on the matter as the previous Commissioner for Competition, Joaquín Almunia, has presented a number of cases and that the new Commissioner, Margrethe Vestager, will follow up on the cases to make sure that the state aid legislation is properly enforced.

Schinas said that all relevant questions on the schemes should now be addressed to Luxembourgish authorities, though all the cases occurred while Juncker was prime minister of Luxembourg, between 1995 and 2013, and referred to the Commission President’s previous applies.

On Wednesday (6 November), Juncker said that the Commission was perfectly within its right to investigate, and that he would not interfere in the work of his Commissioner for Competition.

“I wouldn’t do it, because that would not be decent. I have my idea about the issue, but I will keep it to myself,” Juncker said.

Schinas noted that previous Commission presidents José Manuel Barroso from Portugal and Romano Prodi from Italy lead dozens of cases against their home countries during their respective terms.

http://www.euractiv.com/video/juncker-avoids-commenting-luxembourg-tax-deals-309833

Independent investigation?

Danish journalists present at the press conference pointed out that Juncker has put his Competition Commissioner in an awkward situation, in case the investigation leads to Juncker and to decisions that he made as prime minister or was involved in making. Therefore, Danish MEPs have also called for an independent investigation outside of the Commission.

“Vestager will do her job and no one can tell her what to do and not to do,” Schinas responded. 

Meanwhile, an Italian journalist said that it was “scandalous” that while many Italian companies may have been involved in the Luxembourgish tax evasion schemes, leading to a deepening of the financial crisis in Italy, the Southern European country could now witness the former prime minister of Luxembourg, whose country benefitted from these schemes, imposing further austerity measures in Italy.

On Thursday afternoon, Juncker was supposed to take part in the inaugural conference “Days of Brussels” together with former Commission President Jacques Delors, but around midday, the organisers announced that Juncker had canceled.

Prime Minister Xavier Bettel, who succeeded Juncker a year ago, said his country had not broken any rules and it was not alone in allowing tax schemes for big companies.

Finance Minister Pierre Gramegna told reporters in Brussels that Luxembourg would work with other states to level the tax playing field: “The moment that there is a recognition in the international community that fiscal matters must be equitable and the information should be shared, then Luxembourg would have no problem going in the direction of more transparency.”

He defended Juncker, saying it was wrong to single out “one politician for a particular period of time”.

Positions

The Greens' economic and financial policy spokesman Sven Giegold commented:

"These revelations are a major blow to the credibility of new commission president Junker and his capacity to act for public interest. There has never been such concrete evidence of the extent multinational corporations go to avoid their tax responsibility but also the role of state actors in facilitating this. The fact that EU commission president Juncker served as Luxembourg's finance and prime minister throughout this period makes him directly complicit in this mass corporate tax avoidance."

Manfred Weber, the chairman of the European People's Party (EPP) group in the Parliament, stated:

"The EPP group fully trusts and fully supports the European Commission in the ongoing investigation on schemes in Luxembourg and other member states opened by Commissioner Almunia and which Competition Commissioner Vestager will now be taking over.”

”I assume that Juncker is fully informed about the laws and regulation in Luxembourg. Everything else would be unlikely,” Swedish MEP Cecilia Wickström from the Alliance of Liberals and Democrats of Europe (ALDE) told the Swedish news agency TT.

"Juncker has two alternatives. Either he resigns or an independent investigations clarifies the situation," said Marita Ulvskog, the head of the Swedish social democrats in the European Parliament. Another Swedish social democrat, Olle Ludvigsson MEP, said that ”the money could have been spent in a much better way.” 

President of GUE/NGL and German MEP Gabi Zimmer said in a statement:

"While these latest revelations from the international consortium of investigative journalists (ICIJ) are certainly no surprise, they provide invaluable new evidence that the Luxembourg state is knowingly complicit in tax evasion on a massive scale. Juncker has serious questions to answer. How much longer can these types of cosy relationships between elected governments and corporations continue? EU Finance Ministers meeting in Brussels tomorrow must address the details of these latest revelations and tackle corporate tax avoidance once and for all."

Danish MEP Jeppe Kofod from the Socialists and Democrats told Danish news agency Ritzau:

"We need clear guarantees from Juncker that he was not involved in his country's wrongdoing. If he can't deliver on this, he is finished as Commission President," Kofod said. "No matter if this is illegal or not it does seem as if the actions have been systematic in preventing other EU member states from receiving enormous tax profits. Profits that could have gone to hospitals, welfare, education and job creation, but instead ended up in a tax haven. This is despicable." 

Danish MEP Morten Messerschmidt, representing the European Conservatives and Reformist (ECR) group, told the news agency:

"It's difficult to imagine that Juncker as prime minister and finance minister was unaware of this practise. We need to have an external inquiry of the European Central Bank. There's no doubt that Juncker can't continue as Commission President if he has had the slightest knowledge of this case."

Tove Maria Ryding, Tax Justice Coordinator at the European Network on Debt and Development (Eurodad), said:

"This is deeply concerning and shows that international corporate taxation is in a state of crisis. At a point in time when there is a desperate need for public finance, this collapse in corporate taxation requires urgent action from governments to stem this financial hemorrhage. EU finance ministers are meeting tomorrow. We need them to put together an ambitious plan which ensures multinational corporations pay their fair share of tax. The unambitious initiatives of the G20 and OECD are clearly not solving the problem."

 

Background

More than 300 companies, including PepsiCo Inc, AIG Inc and Deutsche Bank AG, secured secret deals from Luxembourg to slash their tax bills, the International Consortium of Investigative Journalists (ICIJ) reported on 5 November, quoting leaked documents.

Commission President Jean-Claude Juncker, who was prime minister of Luxembourg from 1995-2013, has so far declined to comment.

The companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes, the group of investigative journalists said, based on a review of nearly 28,000 pages of confidential documents.

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