Six years after the LuxLeaks (see EUROPE 11193/1), Luxembourg’s tax practices are once again in the spotlight, with the OpenLux investigation, unveiled on Monday 8 February by the French newspaper Le Monde, in partnership with 16 other international media, including Le Soir, the Süddeutsche Zeitung, OCCRP and Woxx.
This time, the investigation did not start from a leak of private documents, but from journalists who have reconstructed a database from public documents in the trade and companies register and the register of beneficial owners in the Grand Duchy. In all, nearly 4 million documents were examined.
And the observation of these media is indisputable: Luxembourg, which is said to be home to 55,000 offshore companies managing assets worth at least €6.5 trillion, remains “Europe’s tax safe-deposit box”.
Billionaires, large multinationals, athletes, artists, high-ranking politicians and even royal families are reportedly behind these phantom companies, attracted by the tax exemptions. Even more worryingly, some funds are even suspected of coming from criminal activities linked to the Italian mafia, the Russian mob, the Italian extreme right-wing party La Lega, as well as to people close to the Venezuelan regime.
Flaws in the beneficial owners register
As noted by the Tax Justice Network, the OpenLux investigation also highlights the shortcomings of Luxembourg’s register of beneficial owners, which was set up following the adoption of the 5th Anti-Money Laundering Directive (see EUROPE 12005/8) and which requires the creation of public registers of the actual owners of companies in all Member States.
However, according to the investigation, only a small majority of the 140,165 active entities based in Luxembourg reported a beneficial owner (72,350). Some 25,000 active entities failed to comply with their obligation by simply not declaring anything and almost 41,500 companies made a declaration, but without naming a “real” beneficiary.
As the newspaper Le Soir reminds us, Luxembourg law only requires the disclosure of one’s identity if one holds more than 25% of a company’s shares. If this does not apply to anyone, the company does not have to declare its shareholders and can simply provide the names of the principal officers.
Furthermore, based on OpenLux data, the NGO Transparency International and the Anti-Corruption Data Collective published, on the same day, a study according to which 80% of Luxembourg private investment funds do not have an identified owner and 15% of the funds under this obligation made contradictory statements to the Luxembourg and US authorities. Such a situation poses risks in terms of money laundering.
The Luxembourg government denies everything
Anticipating the outcome of the investigation, the Luxembourg government created a dedicated website (http://www.openlux.lu ), on which it refutes the various allegations in detail.
Luxembourg points out in particular that it was one of the first European countries to set up a public register of beneficial owners and that it has opted for an open, transparent register, accessible online free of charge and without any restrictions to the public. At the end of 2020, it estimated that the completeness rate of the register was around 90%.
“Luxembourg fully complies with all European and international regulations on taxation and transparency and applies all Community and international measures on the exchange of information to combat tax abuse and tax evasion”, the Grand Duchy assures.
“This reality is confirmed by several observers, including the OECD and the European Union, who have not yet identified any tax regime or harmful tax practices in Luxembourg”, it argues.
For its part, the European Commission has indicated that it needs more time to digest all this flow of information and draw the necessary conclusions.
“These investigations are obviously important pieces of information, which also push for changes, exposing loopholes that may exist in these systems”, acknowledged Marta Wieczorek, a Commission spokesperson, pointing out, however, that the EU has some of the highest standards of tax transparency in the world.
That being said, she emphasised that Luxembourg is one of the countries that received recommendations in 2020, within the framework of the budgetary process of the ‘European Semester’, asking them to curb their practices favouring aggressive tax planning (see EUROPE 12491/12).
Indignation in the European Parliament
The OpenLux investigation also rekindled criticism of the EU’s ‘blacklist’ of tax havens, which is due to be reviewed next week by EU finance ministers.
Only a few days ago, the European Parliament adopted a resolution (see EUROPE 12641/14) calling for an end to the “absurdity” that EU countries cannot end up on this list, recalled the chairman of the Parliament Subcommittee on Tax Matters, Paul Tang (S&D, the Netherlands). Reacting to the investigation, Oxfam and Attac also shared the same message on Monday.
“Luxembourg tramples on the European spirit when it deprives other EU countries of their tax revenues”, said Sven Giegold (Greens/EFA, Germany). He called on the Commission, along with other MEPs such as Philippe Lamberts (Greens/EFA, Belgium) and Markus Ferber (EPP, Germany), to launch infringement proceedings against countries with incomplete registers of beneficial owners. The German environmentalist intends to request a hearing in Parliament on this issue.
For its part, the Independent Commission for the Reform of International Corporate Taxation (ICRICT) called on the EU to create a European register of assets.
The OpenLux investigation continues to be a point for discussion, in any case. More data are due to be published in the next 3 days. (Original version in French by Marion Fontana)