As Juncker bids farewell, new EU executive begins with scrutiny over Luxembourg tax
02 Dec 2019

Officials from the new European Commission will discuss a report by International Monetary Fund researchers that lists Luxembourg as a world-leading tax haven just days after the former leader of the Grand Duchy departs the EU executive’s helm.

Vice-President Margrethe Vestager and tax commissioner Paolo Gentiloni will on Monday meet IMF researchers who investigated the impact of tax havens on global tax revenues, according to the commission’s agenda.

Jean-Claude Juncker, Luxembourg’s prime minister from 1995 to 2013, ends his five-year mandate as commission president on Saturday. He is not accused of any wrongdoing.

During his term in Brussels, the EU made some progress in the fight against tax avoidance, but was also criticized by EU lawmakers and activists for having set up a tax haven blacklist that exempted its 28 member states from screening.

Luxembourg, a country of 600,000 people, hosts as much foreign direct investment (FDI) as the United States and much more than China, data cited in the IMF report shows, estimating FDI in the Grand Duchy is worth $4 trillion, a 10th of the global figure.

“FDI of this size hardly reflects brick-and-mortar investments in the minuscule Luxembourg economy,” the IMF report says, arguing that much of the flow goes to “empty corporate shells” which reduce tax revenues in other countries.

An IMF spokeswoman said the report did not represent the fund’s institutional view, only that of the authors of the research.

During Juncker’s EU mandate, the commission said Luxembourg had given illegal tax advantages to large corporations, such as tech giant Amazon from 2006 and carmaker Fiat from 2012. But instead of fining Luxembourg, it ordered the recovery of the unpaid taxes.

“A few well-known tax havens host the vast majority of the world’s phantom FDI,” the IMF study said, adding that Luxembourg and the Netherlands, another EU state, absorb nearly half of the $40 trillion FDI, thanks to attractive tax policies and other sweeteners.

By Francesco Guarascio, Reuters, 30 November 2019

Read more at Reuters

Photo: euranet_plus [CC BY-SA 2.0], via Wikimedia Commons

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