Radical development. It's lucky our EUROPE daily bulletin exists! The media, we know, have spread news far and wide on the voluminous documents that describe the old mechanisms of tax evasion involving Luxembourg - which of course has raised endless responses and debate. Just as well-known is the fact that the prime minister of Luxembourg at that time was Jean-Claude Juncker, the current president of the European Commission. The information channels naturally rushed upon the uncovered files, which of course was their duty.
Yet a large part of the newspaper presentation (especially the comment and debate that followed) neglected an essential element: when do these operations that have been criticised date back to? Today companies can no longer escape transparency easily because the situation has very largely developed.
Our bulletin… EUROPE 11192 explained the context and the European Commission's attitude clearly, which several months earlier had opened procedures on the dubious cases of tax evasion in which not only Luxembourg was involved but also the Netherlands and Ireland.
As president of the Commission, Juncker stated that the commissioner for competition, Margrethe Vestager, has taken up the issue and that he himself would certainly not become involved. Pascal Saint-Amans, the head of the OECD's Centre for Tax Policy and Administration, stated for his part that Luxembourg has made “phenomenal progress” towards more transparency (see EUROPE 11194).
The misunderstanding. The significance of these publicised wrongdoings is evident and commendable - these investigations conducted by the media have unearthed and uncovered contracts and agreements between the authorities of Luxembourg at that time and companies requesting specific regimes. Transparency is of course always positive but the misunderstanding concerning the dates of the events continues.
The Luxleaks file set up by the ICIJ (International Consortium of Investigative Journalists) is huge. It describes 548 confidential agreements in its 280,000 pages. Yet a fair amount of this material no longer bears any relation to the current situation. The American authorities in particular have radically overturned the rules of their fight against tax evasion. They have obliged their subsidiaries to bring all their assets together in the balance sheet of the parent company established in the USA, so that the activities exercised abroad cannot escape controls.
It is therefore evident that most of the situations described in the Luxleaks file refer to the past. Their significance is thus largely historical, while remaining useful as a lesson.
Lessons. The efforts at clarification and simplification admittedly do not remove all the difficulties and uncertainties. We can be sure the giants of world finance and their lawyers will take all the initiatives necessary to safeguard their freedom of action and thus their privileges. They have tasked auditors PwC with informing the ICIJ that their documentation has been obtained illegally and that certain media “will use these old documents to draw false conclusions on their aim and their impact”. PwC threatens to take legal action against “the media that use or publish these documents”. What is more, the parent-subsidiary directive (which will enable authorities not to take account of artificial arrangements by multi-nationals and to apply tax on the basis of real data) is not yet in force, with certain member states being late. Let's hope it is operational by the end of 2014.
Legal battle and political battle. It will not in any case be easy to prove tax evasion from certain giants. Amazon and Ikea, for example, have developed arrangements that are so sophisticated that they are probably legal, the experts recognise.
As can be seen, a legal battle is now added to the political battle. This observation strengthens the usefulness of the ICIJ and its initiative.
(FR)