Commission President Jean-Claude Juncker made an unexpected appearance in the European Parliament hemicycle yesterday (12 November), and apparently succeeded in defusing tensions following the “Luxleaks” revelation of secret deals granting preferential tax treatments to multinational companies in his home country, Luxembourg.
Juncker basically repeated the same arguments he used with the Brussels press corps a couple of hours earlier.
>> Read: Juncker breaks cover on Luxleaks
His main message was that the leaks did not reveal anything illegal. Juncker insisted that there is no conflict of interest concerning the rulings allowing major companies to avoid taxation, which were made when he was prime minister of Luxembourg, currently being investigated by the commission he now leads.
The scandal erupted on 5 November, when the International Consortium of Investigative Journalists (ICIJ) published articles based on a review of nearly 28,000 pages of confidential documents, which reveal that more than 300 international companies appear to have channeled hundreds of billions of dollars through Luxembourg and saved billions of euros in taxes.
“There probably was a certain amount of tax avoidance in Luxembourg, as in other EU countries. We find this everywhere in Europe, because there is insufficient tax harmonisation in Europe,” Juncker told MEPs.
The Commission President also announced that he had proposed to the College of Commissioners that automatic exchange of tax rulings should be made compulsory. Economic and Financial Affairs Commissioner Pierre Moscovici had been charged to draft such a regulation, Juncker said. Moscovici, who was standing besides Juncker, didn’t speak.
Parliament President Martin Schulz then gave the floor to the leaders of the parliamentary groups. Following their interventions, it became clear that the three groups that had predominantly backed the Juncker Commission on 22 October continue to back him, in spite of the scandal.
EPP group leader Manfred Weber said he was confident that Juncker will resolve the problems that are now on the table, adding that “it is not the EU that failed, but the member states themselves who have made no efforts to harmonise their corporate tax bases”.
S&D group leader Gianni Pittella also made it clear he would not back demands for a motion of censure against Juncker.
His statement indicated that the centre-left group is giving time to Juncker .
“We ask President Juncker to take immediate concrete measures to finally regulate tax ruling and fiscal dumping to achieve a full harmonisation of fiscal policies between member states. First of all, we ask President Juncker and his Commission to adopt a clear and extensive definition and a common set of criteria to identify tax havens. Commission and member states should then refrain from granting EU funding to companies involved in fiscal law infringement. Under country by country reporting, multinationals would finally have to break their information down by country of operation – including in each tax haven. Taxes would have to be paid in the country where profits are realised. This is what we expect from the Commission and what we demand,” Pittella stated.
ALDE leader Guy Verhofstadt said the investigation by the Commission must be completed by the end of the year, and deal not only with three countries, but with the problem of tax evasion in general. He also called for a special investigative committee to be set up in Parliament, and asked others groups to support this.
“This is also a clear case where we need more Europe – to set up common tax compliance legislation and a convergence code, not general harmonisation, because we don’t know at what level to harmonise,” Verhofstadt said.
To this, Juncker replied that investigations would target all countries, and then Belgium, of which Verhofstadt was Prime Minister, and may also have a problem.
Kay Swinburne from the conservative ECR group said that further work is needed to clamp down on companies that aggressively seek to avoid paying their fair share of tax.
Regarding the allegations made against Luxembourg, she urged the commission to produce findings of their investigation into various EU countries swiftly, and to ensure public confidence that the commission’s investigation will remain impartial.
However, Swinburne rejected Juncker’s calls for EU tax harmonisation, arguing that tax competition within the EU helps the bloc to remain globally competitive.
Gabriele Zimmer, leader of the leftist GUE/NGL group asked Juncker to explain his actions as a former Prime Minister of Luxembourg, and why he allowed companies the opportunity to avoid tax in his country, thus depleting poorer EU countries of financial resources.
Philippe Lamberts, co-president of the Greens group, called on Competition Commissioner Margarethe Vestager to broaden the scope of the investigation, adding that the Netherlands was the same kind of tax haven as Luxembourg.
UKIP deputy leader Paul Nuttall called Juncker a hypocrite over tax evasion, and demanded that he resign, or step down, pending an investigation.
“The definition of hypocrisy according in the Oxford English dictionary is the practice of claiming to have higher standards or more normal beliefs than is the case. And I don’t think anyone in this chamber could disagree with me today when I say this perfectly sums up the position of the President of the European Commission here today,” Nuttall said.
Bruno Gollnisch, of Marine Le Pen’s Front National, accused Juncker of using scandals to get more power. He stated that tax harmonisation is not needed, but that there is a need to make multinationals pay taxes in the countries where they make profits.
Gollnish also compared Juncker to Vidocq, a former criminal who became a very effective French police chief in the 1880s. It is not clear if Juncker took this as an encouragement.