Public officials across the globe reacted with swift condemnation and calls for reform following ICIJ’s investigation into secret tax deals between Luxembourg and hundreds of international corporations.
The New York Times said the revelations have sparked a “rising furor” in Europe. Reuters called the reaction a “tax storm.” Response has been especially instense in Brussels, where the European Commission has been seeking to eliminate tax havens within the European Union.
Reporting by ICIJ and its partners was based on a leak of 548 private tax rulings – also known as “comfort letters” – negotiated by accounting giant PricewaterhouseCoopers on behalf of more than 340 multinational corporations. The documents provided a road map into how corporations shave billions of dollars in taxes by routing profits through Luxembourg.
At the center of the “Lux Leaks” controversy is Jean-Claude Juncker, new president of the European Commission. Juncker was Luxembourg’s prime minister at the time many of the country’s tax-avoidance rules were enacted.
Among the latest impacts and responses:
The European Commission will use the documents uncovered by the ICIJ and shared with media partners around the world in its ongoing investigation of tax avoidance at the European level, Margaret Vestager, the EU competition chief, said."We consider the Luxembourg-leaked documents as market information. We will examine it and evaluate whether or not this will lead to the opening of new cases," Vestager told a press briefing on 20 November 2014.
Vestager said the leaked tax documents from Luxembourg have sparked a broader debate in the European Union that she hopes will help pass a long-standing proposal for a common consolidated corporate tax base."I hope that some of the momentum created by the work of the journalists will enable us to pass it, because it would be a great benefit for citizens, but also for the companies who do not do tax planning."
Plans for tax reform were proposed during the sovereign debt crisis three years ago, but failed to garner enough support in the Council of Ministers, which represents the 28 EU member states. Any agreement on taxation requires unanimity at the European level."I would like to say that I admire the journalistic work in this case because it is very important and has contributed to more transparency and a change in the tax debate in Europe. And when we consider the documents to be market information, it is because we will use the material and consider it legitimate to do," said Vestager.
In Australia for the G20 Leaders' Summit on November 15 and 16, Juncker pledged to push for tax reform in Europe, but faced continued pressure over his links to Luxembourg's own controversial tax policies revealed by 'Lux Leaks'. Tim Costello, chair of the civil society group C20 compared Juncker's presidency as "Dracula in charge of the blood bank," while reporters again asked Juncker if he would resign.
Luxembourg Finance Minister Pierre Gramegna told reporters at a press briefing that he was "totally astonished" at the publication of more than 500 tax rulings by ICIJ and its media partners, and called it an "attack" on his country. At the same briefing, Luxembourg Prime Minister Xavier Bettel said the Duchy was making "enormous efforts" to clean up its image.
Almost a week after the first stories were published, Juncker fronted the media and the European Parliament for the first time to deny that he was the "architect" of Luxembourg's tax "problems" but admitted as prime minister of the tiny Duchy he was "politically" responsible. The subsequent debate on the floor of the parliament was dominated by questions of European tax policy and Juncker's connections to Luxembourg.
A strongly-worded editorial from media organization Bloomberg calling for Juncker’s resignation was widely reported by a number of media outlets days after the first 'Lux Leaks' stories were published. Ructions from within the European Parliament were also growing, with left-wing parties gathering support for a censure motion against their newly-elected President, and many other MEPs calling for Juncker to address the Parliament and the public and respond to concerns regarding Luxembourg’s tax policies under his tenure as the Duchy’s prime minister.
Meanwhile, Juncker found some support from sources both near and far. Pierre Moscovici, European Commissioner for economics, repeated comments that Juncker was the right person to preside over the European Commission, and that Juncker believed in a “world of fiscal transparency.” An editorial in Cayman Islands’ Cayman Compass media outlet also voiced support for Juncker, based on the principle that “every country must be able to write and enforce its own tax laws.” Luxembourg’s Foreign Affairs Minister Jean Asselborn, in an interview with German outlet Der Spiegel, pledged to change Luxembourg’s tax policies and put an end to tax avoidance schemes.
In Germany, Finance Minister Wolfgang Schaeuble, told German lawmakers that Luxembourg has “a lot to do” to meet global standards based on the ICIJ findings. At the same time, Sven Giegold, a spokesman for Alliance90/Greens political party said ICIJ’s revelations are “a major blow” to Juncker’s credibility.
“There has never been such concrete evidence of the extent multinational corporations go to avoid their tax responsibility but also of the role of state actors in facilitating this,’’ he said. “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.”