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5 November 2015

A year on, Europe’s tax affairs are still a mystery

A year on, Luxembourg's tax arrangements remain shrouded in mystery, says Molly Scott Cato.

By Molly Scott Cato

There have been times, while sitting in the European Parliament’s Special Committee on tax, set up in the wake of the LuxLeaks scandal that I have wondered whether the famous Belgian sense of the surreal has overwhelmed us all. In the solemn parade of senior politicians, accountants and tax inspectors who gave evidence, not a single person was prepared to apologise for having deprived the people of Europe of billions because they had agreed secret deals with corporations.
The moment of high farce was reached when we questioned Jean Claude Juncker, now best known as President of the European Commission, but previously President and Finance Minister of Luxembourg and so arguably the architect-in-chief of the Luxembourg tax chicanery. Since Juncker became finance minister of Luxembourg the proportion of US profits registered there has gone from virtually nothing to 10 per cent. But far from showing any sign of remorse, did not deign to answer our questions and attempted to portray himself as the white knight determined to battle tax dodging on behalf of a grateful public.

By contrast, the appearance by Antoine Deltour, the whistleblower who exposed LuxLeaks – probably the biggest tax scandal in the history of the European Union – was marked by modesty and self-deprecation. Yet for acting in the public interest, Deltour faces charges for theft and betrayal of state secrets and must stand trial in the coming months. He is being sued by giant accountancy firm, PricewaterhouseCoopers, the firm that employed him and helped multinational corporations avoid tax. Neither PwC nor the multinationals are on trial but Deltour faces the prospect of up to five years in prison.
Those on the right repeatedly point to the importance of evidence-based policy-making, yet when confronted with evidence they don’t like, the architects and collaborators of tax dodging seek to punish the messenger, without whose evidence the LuxLeaks scandal would never have come to light. And, as it turns out, evidence is in short supply when it is an inconvenience to the UK government.

Since the G8 UK Presidency, the British government has proclaimed tax transparency as one of its priorities. Yet the UK is one of the member states that has denied the Special Committee on Tax access to important documents they requested in order to carry out its mandate to investigate tax evasion and dumping in Europe. It could be a scene from the new Bond movie: 25 background documents held by the European Commission, which are ‘confidential’ because Member States do not want them disclosed. While 14 Member States in Europe have agreed for information in these documents to be released, the UK is one of the countries refusing any disclosure at all.

The Commission has offered limited and selective disclosure of these documents, to be seen by a small select group in a secret locked room and without any phones or pens present. Cue the James Bond secret cufflink camera, though as papers related to the UK have been retracted, there would be nothing to photograph apart from thick black lines.

As Greens, we have argued the Commission’s offer is inadequate and that the Parliament has a right to this information. Indeed, the legal service of the European Parliament agreed, concluding that Parliament does have the right to receive this information, even if confidential. So, the UK government stands in the way not only of the disclosure of key documents relating to tax dodging but is also undermining the democratic rights of the Parliament itself. It is for this reason I am challenging the government for answers on why, when it says tax transparency is such a priority, it is blocking our investigations.

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Which brings us back to Mr Juncker. Ultimately, he has the final say on whether to allow the documents to be transmitted to the European Parliament. But we won’t hold our breath. Here is a man who has himself not only withheld important details on his country’s tax arrangements but takes an elastic approach to the truth. He claimed he knew nothing about the so-called “Krecké page”, a page removed from a 1997 economic report concerning tax rulings and secret deals agreed between the government and businesses to attract them to Luxembourg. We beg to differ. We say there is clear evidence that he knew about the omitted page and the practices that led to the LuxLeaks scandal exactly a year ago. So, how could we expect someone who is happy to treat evidence so lightly to make documents freely available?

In this tax avoidance saga laced with secrecy, dishonesty and scandal we have to question who the heroes are and who are the villains? Who should be blamed and shamed and who should be lauded? It appears in the topsy-turvy world of the globalised economy it is the politicians doing the corporates’ bidding who are exalted, while the humble whistleblowers, who seek to act for the common good, are not only belittled but actually put on trial.

In light of the fact progress on tackling tax dodging has been extremely limited since LuxLeaks, Greens in the European Parliament have outlined a ten-point plan for tackling tax avoidance. Top of this list is the protection of whistleblowers. Those who expose illegal or dodgy practices should be offered European protection; a guarantee that they cannot be prosecuted and a European fund, financed by the money recovered thanks to their leaks, to support them when they reveal scandals in the public interest. Beyond that they should be elevated to the status of hero.

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