The European Commission’s investigations into tax deals offered by the Irish, Dutch and Luxembourg governments comes at an interesting time in the life of the commission itself.
The Lisbon Treaty requires that the outcomes of European elections be taken into account when a commission president is being selected, and there is a reasonable argument that the candidate of the European People's Party, which emerged from the elections as the largest group, should be proposed by the European council for the top commission role. That would be Luxembourg's Jean-Claude Juncker (right).
Those shouting for Juncker argue that such a proposal would be a step along the road to addressing the so-called democratic deficit in the way the union is run. But what about the €1 trillion tax avoidance and tax evasion scandal?
Juncker was prime minister of Luxembourg from January 1995 to December 2013 when it transformed its tax laws, and its tax policy, to become a favoured location for those, such as Amazon, who wanted to pursue aggressive tax avoidance policies within the EU.
The race towards the bottom, c'est moi, Juncker might be imagined as saying.
Of course newspapers in Ireland can hardly throw stones, but at least the policy of attracting multinational investment on the basis of a low corporation tax rate is more upfront than the type of regime put in place by Luxembourg during Mr Juncker’s tenure.
In more recent years, Ireland’s low tax rate has been partnered by the PR disaster that is the double-Irish and other such schemes that use Ireland as a conduit for money on its way out of the EU towards the Cayman Islands, Bermuda, and other tax havens. However such schemes make use of an unforeseen opportunity created by the conjunction of global tax rules and domestic tax regimes. Luxembourg’s regime looks more like something created with the direct objective of allowing companies to circumvent the tax regimes of its EU partners, while skimming a small percentage of the financial throughflow.
If the man from the Grand Duchy gets the top job, the results of the commission’s tax investigations will create an interesting news day.
