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Spotlight on ‘weakened’ Juncker as officials pledge action

Juncker promises to push for tax reform after new leak, but says LuxLeaks affair has "weakened" him.

Jean-Claude Juncker

Jean-Claude Juncker has admitted Luxembourg Leaks has “weakened” him as ICIJ and its partners published a new set of leaked tax agreements this week, prompting further calls for tax policy reform.

ICIJ and its media partners obtained a second set of leaked documents, and published stories on Tuesday and Wednesday that expanded the list of major international companies who negotiated secret tax agreements, and confirmed the involvement of all the “Big Four” accounting firms.

Among the company names in the new leak, Disney, Koch Industries, and Skype have all attracted attention for their Luxembourg arrangements.

Juncker pledges tax harmonisation

The newly-elected President of the European Commission told French newspaper Libération on Wednesday “I have nothing to reproach myself” following the Luxembourg Leaks revelations, but conceded the furor has hurt him politically.

“Objectively speaking, I was weakened because the LuxLeaks suggests that I would have participated in schemes which infringe elementary rules of ethics and morality,” Juncker said.

The new trove of LuxLeaks documents came from a second leak, obtained by ICIJ shortly after publishing the first set ofLuxembourg tax agreements in early November.

Juncker, who survived a vote of no confidence in the European Parliament after the first LuxLeaks publication, reaffirmed his plan to push for policy reform to crackdown on tax avoidance in Europe.

“For tax harmonisation, the coordination and bringing together of tax policies is an absolute necessity. I will do it,” Juncker told reporters as he entered the European Court of Justice in Luxembourg for his official swearing-in ceremony on Wednesday.

Tax authorities respond

The second round of leaked documents published this week has added to momentum pushing authorities towards tax avoidance crackdowns and policy reform.

Australian Tax Office boss Chris Jordan called for joint compliance action by tax treaty partners, and pledged to use the information released in ICIJ’s LuxLeaks database as part of investigations into tax avoidance by multinational companies.

“We have a pretty good picture of how these companies are operating across borders but of course we use information such as the ICIJ data to check whether there is further evidence or information we need to test with these companies,” Mr Jordan told the Australian Financial Review on Wednesday.

“I extend my offer to other jurisdictions to co-operate and consider joint compliance activity.”

In Ireland, a spokeswoman for the Irish Revenue Commissioner confirmed the LuxLeaks documents were being reviewed for potential corporate wrongdoing.

“Revenue is currently examining the material made available on the ICIJ website, which is presented primarily in terms of Luxembourg tax issues, to identify interactions with the Irish tax base,” she told the Irish Times.

“At this point we have not sought material directly from the Luxembourg tax authorities- but we will not hesitate to do so if necessary.”

Earlier this week, Belgium’s Finance Minister Johan van Overtveldt announced Belgium had negotiated to receive all tax rulings negotiated by Belgian companies from the Luxembourg authorities.

“These latest leaks … show that we are far from knowing the extent of the practices engaged in by multinational firms.” – Greens MEP Sven Giegold

A statement from the Luxembourg finance ministry denied this was a new policy, and said these tax rulings had always been available to national tax authorities that requested them.

“The rulings issued by the Luxembourg tax authorities are not, and have never been, secret,” it said.

Responding to the new “Lux Leaks” revelations, the Luxembourg finance ministry conceded although some of the more common tax strategies shown in the documents “are compliant with international and national law, [they] can be put in doubt from an ethical point of view.”

Luxembourg has also drafted legislation that would create a commission to advise the tax authorities on all tax rulings in the country, in order to provide more oversight of the process.

In Germany, business newspaper Handelsblatt hinted at possible reform at the European level, citing senior officials in Brussels who said the EU executive was considering rules that would force multinational companies to publish all their tax agreements with European countries as part of their regular fiscal reports.

Politicians issue warnings

Member of European Parliament and Greens party finance spokesman Sven Giegold said the latest release of documents hints at a much bigger picture that extends to more companies, and more countries.

“These latest leaks on corporate tax avoidance in Luxembourg show that we are far from knowing the extent of the practices engaged in by multinational firms to avoid their tax responsibility,” he said in a statement.

Giegold again called for a full European inquiry, which was earlier denied by the parliament, and urged a strong response from Juncker.

“If Jean-Claude Juncker fails to swiftly bring forward comprehensive proposals to tackle tax dumping and avoidance, his position as Commission president will become untenable.”

Meanwhile, leader of the European socialists Gianni Pittella gave Juncker a six-month deadline for action before the socialists – whose votes helped Juncker survive a censure motion in November – would withdraw their support for his leadership.

“The trust we’ve instilled in him is not a blank check. It is conditional on his actions,” Pittella told reporters at a press conference.

The European Commission announced agreements on Tuesday as part of its push to close tax loopholes and implement exchange of tax information within Europe.

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