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

[rooster59]

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

By Francesco Guarascio

 

FILE PHOTO: European Economy Commissioner-designate Paolo Gentiloni of Italy attends his hearing before the European Parliament in Brussels, Belgium October 3, 2019. REUTERS/Yves Herman/File Photo

 

BRUSSELS (Reuters) - Officials from the new European Commission will discuss an International Monetary Fund study 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, IMF data 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.

 

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.

 

Other tax havens listed by the IMF report are Ireland, another EU state, Hong Kong, the British Virgin Islands, Bermuda, Singapore, the Cayman Islands, Switzerland and Mauritius.

 

After revelations of widespread tax avoidance schemes used by corporations and wealthy individuals to lower their tax bills, the EU set up a blacklist in 2017, but it adopted a very lax definition of tax havens, making a zero corporate tax rate not a sufficient condition for being listed.

 

No EU country has ever been screened and the current blacklist includes only eight jurisdictions, mostly Pacific and Caribbean islands, but none of the tax havens indicated by the IMF report.

 

On Thursday EU states also blocked a reform of EU rules that would have forced large firms to reveal how much profit they make in each EU state, which could have led to pressure to rebalance their tax burden. Luxembourg and Ireland opposed the overhaul, while the Netherlands supported it.

 

Gentiloni has said he wants to step up the EU fight against tax avoidance and has pledged to work for sanctions against blacklisted jurisdictions.

 

(Reporting by Francesco Guarascio @fraguarascio; Editing by Alison Williams)

 

-- © Copyright Reuters 2019-11-30

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[Thian]

8 minutes ago, rooster59 said:

Other tax havens listed by the IMF report are Ireland, another EU state, Hong Kong, the British Virgin Islands, Bermuda, Singapore, the Cayman Islands, Switzerland and Mauritius.

 

What about Monaco?? All the millionaire top sporters suddenly live there to avoid tax.

[melvinmelvin]

 

Interesting timing,  Jucker goes back to Lux  EU starts investigating Lux and her handling of FDI

 

Before Juncker became Commission boss he was PM in Lux and before that he was minister of finance in Lux

 

 

[grumpy 4680]

      Would not hurt to investigate EU's Finances at the same time.

[roquefort]

No coincidence that this list of low corporate tax rates includes some of the most efficient, successful countries in the world with the highest standards of living. So instead of copying them to try and attract more FDI ourselves, let's investigate them, hound them and force them to raise their tax rates to make them as unattractive as we are. Talk about a race to the bottom!

[candide]

1 hour ago, roquefort said:

No coincidence that this list of low corporate tax rates includes some of the most efficient, successful countries in the world with the highest standards of living. So instead of copying them to try and attract more FDI ourselves, let's investigate them, hound them and force them to raise their tax rates to make them as unattractive as we are. Talk about a race to the bottom!

As too shortly suggested in the OP the issue is not the level of tax rates that matters. Countries are free to set tax rates at the level they wish, it is not illegal. What is illegal is:

- to offer better rates to foreign companies than to domestic companies (that was the case in Luxemburg), at least in the EU,

- to be complicit of illegal tax evasion by hiding information.

 

As for the tax heaven model being a source of economic success, it works only in small countries. They have more to win by attracting foreign headquarters, than to lose by applying low tax rates to their domestic companies.

[Sydebolle]

Well, Juncker going back to Luxembourg? Good news for all the wine and booze dealers then ...

[TopDeadSenter]

Surely it's up to sovereign nations to have whatever tax policy they choose. This really highlights how insane the EU chiefs are that they think they can dictate policy to the likes of Mauritius, Singapore and the Caymans. Thanks Dickens we in the UK are pulling out of this gang as hard and fast as possible(after a sputtering 3 years of socialists in denial).

 

 I do remember one financial flyboy once told the IMF the cold hard truth. "The IMF is not my father". Well said Dr Thaksin.

[Andrew65]

11 hours ago, TopDeadSenter said:

Surely it's up to sovereign nations to have whatever tax policy they choose. This really highlights how insane the EU chiefs are that they think they can dictate policy to the likes of Mauritius, Singapore and the Caymans. Thanks Dickens we in the UK are pulling out of this gang as hard and fast as possible(after a sputtering 3 years of socialists in denial).

 

 I do remember one financial flyboy once told the IMF the cold hard truth. "The IMF is not my father". Well said Dr Thaksin.

Over time we'll start to see the harmonisation of taxes throughout the EU. I don't think they were too impressed to be bailing Ireland out when companies are operating almost corporation-tax-free there, they've already tried to get Apple Computer to stump up 13 billion.

[bristolboy]

On 11/30/2019 at 8:52 PM, roquefort said:

No coincidence that this list of low corporate tax rates includes some of the most efficient, successful countries in the world with the highest standards of living. So instead of copying them to try and attract more FDI ourselves, let's investigate them, hound them and force them to raise their tax rates to make them as unattractive as we are. Talk about a race to the bottom!

Do you understand how tax havens work? It's not about real investment in that nation's economy. It's about hiding the profits actually earned elsewhere and sheltering them thanks to highly favorable tax treatment. It does gives a nice living to resident accountants and lawyers and such. But overall, the economies of the small tax havens are actually damaged by such activity.

Why Tax Havens Are Political and Economic Disasters

https://www.theatlantic.com/business/archive/2016/07/tax-haven-curse/491411/

Seeking prosperity through lax business and tax regulations leaves small relatively undeveloped countries worse off. Or even not so undeveloped places like Jersey. It's what happens when the super rich end up being in control of a small economy.

The author of this article, Brooke Harrington, actually studied to become a wealth advisor to the super wealthy. Her book, Capital Without Borders, is quite a shocker.

[sirineou]

On 11/30/2019 at 8:52 AM, roquefort said:

No coincidence that this list of low corporate tax rates includes some of the most efficient, successful countries in the world with the highest standards of living. So instead of copying them to try and attract more FDI ourselves, let's investigate them, hound them and force them to raise their tax rates to make them as unattractive as we are. Talk about a race to the bottom!

Sure, every country should follow this model and be a tax haven,

Who needs taxes?

[Baerboxer]

On 11/30/2019 at 7:37 AM, melvinmelvin said:

 

Interesting timing,  Jucker goes back to Lux  EU starts investigating Lux and her handling of FDI

 

Before Juncker became Commission boss he was PM in Lux and before that he was minister of finance in Lux

 

 

 

And under his EU tenure, Luxembourg isn't fined when large multinationals are found to have avoided tax with their help. The tax is just claimed back. Hmmm. Why was that? Surely they should have been fined?

 

Under his tenure no EU country is even checked.

 

Just another totally corrupt European politician lining his and his country's pockets.

[Baerboxer]

15 hours ago, Andrew65 said:

Over time we'll start to see the harmonisation of taxes throughout the EU. I don't think they were too impressed to be bailing Ireland out when companies are operating almost corporation-tax-free there, they've already tried to get Apple Computer to stump up 13 billion.

 

The miracle of the Irish Tiger economy - attract companies by giving massive tax advantages.

 

And plead poverty to the generous EU.

[Baerboxer]

On 11/30/2019 at 7:10 PM, grumpy 4680 said:

      Would not hurt to investigate EU's Finances at the same time.

 

More chance of investigating the Catholic Church or Mafia's finances than the EU's! Don't hold your breath!

[bristolboy]

15 minutes ago, Baerboxer said:

 

And under his EU tenure, Luxembourg isn't fined when large multinationals are found to have avoided tax with their help. The tax is just claimed back. Hmmm. Why was that? Surely they should have been fined?

 

Under his tenure no EU country is even checked.

 

Just another totally corrupt European politician lining his and his country's pockets.

And what's been stopping the totally noncorrupt UK from stopping such tax avoidance practiced by its own citizens? Does the word "Tories" ring any bells?

[Andrew65]

26 minutes ago, Baerboxer said:

 

The miracle of the Irish Tiger economy - attract companies by giving massive tax advantages.

 

And plead poverty to the generous EU.

...and go bankrupt for 80 billion, or whatever it was.

 

Also, too much tax avoidance/evasion generally, as one of my old Irish friends says.

 

All the fault of the poor/unemployed, which I don't swallow at all.