European Commission president Jean-Claude Juncker defended his record as prime minister of Luxembourg on Thursday, denying he had any role in the formulation of tax rulings offered to multinational companies which allowed companies to reduce their tax bills. Appearing before the European Parliament’s Special Committee on Tax in Brussels, the European Commission president said that as prime minister of Luxembourg he was not involved in the tax arrangements entered into by the Luxembourg tax authorities and multinational companies.
“I never gave instructions to Luxembourg tax authorities,” he said. “I’ve never talked about tax arrangements that the commerce banks might have.”
Mr Juncker stressed that the use of tax rulings was not a phenomenon that applied to Luxembourg, but was the practice in many member states, noting that ‘EU leaks’ would have been a more appropriate name for the ‘Luk Leaks’ scandal.
Mr Juncker, who assumed leadership of the European Commission last November, just weeks after the ‘Luxembourg Leaks’ scandal revealed how hundreds of countries had slashed their tax bills, said he was prioritising the issue of corporate tax avoidance during his five-year term at the helm of the EU’s executive arm.
The commission would work to reform the “unfair, untransparent system” which sees thousands of companies reduce their tax bills by exploiting different tax rules in different countries.
Hiding behind national rules
“There are those who benefit from this because they hide behind different national rules. We need to get a better idea of how multinational companies are behaving - they are extremely adept in this area... It is our duty to try and bring some order into this chaotic situation,” he told the 45-member group.
He said that the establishment of a common consolidated corporate tax base (CCCTB) “is something we are committed to,” and he argued that the European Commission should pursue a common tax base, regardless of developments at international level.
“It’s important that we have a European [approach]. If we don’t convince partners in the G20, we should do it at least in Europe.”
The Government, which is strongly opposed to the proposed introduction of the CCCTB has argued that the EU must tackle the issue of aggressive tax planning at an OECD and global level, arguing that a clamp-down at EU level could hamper EU competitiveness.
In a bid to assuage countries such as the Republic, the Netherlands, Sweden and the UK about the impact of new European Commission proposals on corporate taxation, Mr Juncker said that the commission’s proposals would “not act as a brake on growth” and emphasised the commission’s commitment to the jobs and growth agenda.
Moscovici
EU economics commissioner Pierre Moscovici, who also addressed the committee, said that tackling corporate tax at an EU level was important for the European SME sector.
Noting that SMEs have a tax burden that is up to 30 per cent higher than larger companies according to some estimates, he said the commission was working on a number of proposals to tackle the issue of aggressive tax planning by multinationals, including a proposal to revive the stalled CCCTB proposal, a consideration of the issue of minimum effective taxation, and the obligation on member states to share information about tax rulings offered to companies.
“At the heart of all this is an effort to prevent multi nationals getting away with [these schemes], he said.
“SMEs don’t have the resources to run these kind of strategies.”
The European Parliament’s special Committee on Tax, which visited Ireland in May, was established earlier this year in the wake of the Luxembourg Leaks scandal , though attempts to establish a full Parliamentary inquiry into the matter were quashed. It is due to present its final report next month.
