European Commission chief Jean-Claude Juncker admitted on Tuesday (30 May) that he overlooked certain effects of Luxembourg’s tax policy during his tenure as prime minister of the tiny member state.
Juncker was thrust into the world spotlight in late 2014 when his native EU duchy was singled out in the LuxLeaks scandal as a tax haven for dozens of multinationals, including Ikea and Pepsi.
Juncker made his comments while addressing a European Parliament hearing on the Panama Papers, in which he also argued EU member states could still use tax policy to compete for investment.
“I am in favour of tax competition but it has to be fair and it was not always fair,” Juncker told MEPs in Brussels.
“(As prime minister) I was with a few others neglecting that dimension … on fair competition,” he added, referring to the practice of EU neighbours using low taxes to outgun each other for foreign investment.
The EU has made cracking down on very low taxes a high priority since LuxLeaks unveiled the two decades of tax deals made when Juncker was premier.
“I was a minister at the time, I wasn’t responsible for these business issues,” Juncker said, defending heated questions from MEPs on his role in Luxembourg’s cushy and secret tax arrangements.
“I never discussed fiscal measures with a company. It’s a clear principle in Luxembourg, but not everywhere in the European Union,” he said.
From Saul to Paul
German Green MEP Sven Giegold told Juncker his name was “associated with a country getting rich through tax avoidance”. His previous positions contrast sharply with his current work as head of the European Commission, spearheading the fight against money laundering, tax avoidance and evasion. Juncker repeatedly stressed that in recent months, the Commission has produced twelve new initiatives in the field of taxation.
But this failed to satisfy Giegold. “You have turned from Saul to Paul on the road to Damascus,” he said, referring to the conversion of Saul into Paul the apostle, in the New Testament. “People want a clear idea of what you did in the past,” said Gielgold.
German CDU lawmaker Thomas Mann (EPP) suggested that the current requirement that changes in tax policy needed unanimity from all member states is an “obstacle to tax reform”.
Juncker responded that he was in favour of a treaty change to shift from majority to qualified (two-thirds) majority voting in tax matters. Later, he added that he might even consider the never-before used “Rule 116” (which sets out a procedure for amending distortions in the internal market) to change the process for tax reforms.
LuxLeaks helped spark a major global push against the generous deals handed to multinationals, which grew even stronger with new revelations such as the Panama Papers and Football Leaks.
The revelations ended up prompting the EU to take urgent steps to stop global firms avoiding tax in Europe, including inquiries into firms such as Apple, McDonald’s and Amazon.
In addition to the historic decision against Apple, the European Commission has already decided against Fiat in Luxembourg, and Starbucks in the Netherlands, ordering them to repay up to €30 million.
“Juncker is a rather catastrophic symbol for the European Union,” said French Green MEP Eva Joly, a strong advocate for fair taxation.
“He represents hypocrisy. He represents the fact that the EU is completely oriented towards helping multinationals,” she added.