Sat. Jun 3rd, 2023

Participants at a hearing jousted with each other as to whether the LuxLetters revelations constitute improper behaviour or not, while the Commission said it had little evidence to go on.

LuxLetters is an investigation run by a consortium of journalists which in July uncovered practices considered by many as dubious at best. Multinational corporations registered in Luxembourg are believed to use a loophole in the country’s tax system to circumvent EU transparency rules and underpay tax.

The hearing, organised by the EP’s subcommittee on tax matters, notably pitted Le Monde journalist Anne Michel, one of the persons involved in the investigation, against Gérard Cops of Price Waterhouse Coopers Luxembroug. MEPs sought to obtain more information from Ms Michel and Mr Cops while also asking the Commission representatives present what actions could be envisaged.

Opening the hearing, the Chair of the subcommittee Paul Tang (S&D, NL) expressed his regret that, for the second time running, Luxembourg’s finance minister, Mr Gramegna, had refused to attend and engage in the meeting. “With these two refusals, the Luxembourgish authorities did not only pass on the opportunity to clarify the situation in an open and honest discussion, but they have also deprived citizens of valuable information and have been avoiding democratic scrutiny. It goes without saying that these two refusals lead to suspicion in their regard”, Mr Tang concluded. Mr Gramegna provided a two page written statement before the meeting, claiming that the allegations made by the investigation were “unsubstantiated and unfounded”.

You can follow the meeting again here.

Absence of written proof – a bullet proof exonerating factor?

Ms Michel explained that the practice employed by multinationals to pay less tax was not illegal because no legally binding decisions were issued by Luxembourg authorities and therefore no rules were breached. This did not however mean that the practices did not exist or that they were not flying in the face of EU regulations, notably on the sharing of tax information. Mr Cops responded that Luxembourg was being unfairly singled out and that nothing expressly illegal had been committed.

Little to go on

The Commission representatives said that they had requested information from Luxembourg and recently received some information. They had for the moment no evidence of the existence of tacit rulings nor that taxpayers were relying on the information letters sent to the tax authorities for paying their taxes. They also acknowledged that the nature of the practice made investigating it difficult.

Tell tale signs?

Some MEPs expressed frustration at the Commission’s seeming inability to effectively clamp down on tax avoidance of this nature.

MEPs noted that Luxembourg had registered a big decline tax rulings in the last years, possibly a sign that tax statuses were being settled with the Luxembourg authorities through other means.

Broadening the scope of what information must be exchanged under the Third Directive on Administrative Cooperation (DAC 3) so as to catch the practices uncovered by LuxLetters was also mentioned by MEPs as a path to address the problem.

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