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European Commission President Jean-Claude Juncker today (17 September) gave MEPs an occasionally short-tempered defence of his alleged role in the Luxleaks tax scandal.
Juncker was appearing before the European Parliament’s Special Committee on Tax Rulings, set up after it emerged that Luxembourg gave sweetheart tax deals to multinational companies when he was the country’s prime minister and finance minister.
Such deals are controversial because they erode the tax revenues of other countries, where multinational companies’ profits are actually generated. Corporate tax avoidance is thought to deprive public budgets of billions of euros a year.
“I didn’t set up any system in Luxembourg to ensure there was tax avoidance in order to discriminate against other member states,” he told MEPs. “You actually in fact exaggerate my political talent.”
“I never gave an order to set up a certain approach […] the Luxembourg tax authorities are very allergic to the idea of ministerial interference,” he said. “I think you have (an) exaggerated idea of (the) power of the prime minister in this respect.”
The Luxleaks scandal broke as Juncker took over the Commission president November. The executive later launched state aid investigations against several member states, including Luxembourg.
Juncker said: “You should rather say EUleaks rather than Luxleaks – this is not only a phenomena that only happens in Luxembourg.”
The probe aims to discover whether the sweetheart deals constituted anti-competitive and illegal state aid. But that has not silenced critics concerned that the investigation would be carried out by an institution helmed by a man suspected of playing a central role in turning Luxembourg into a tax haven.
Juncker moved to play down those fears, telling the special committee that the investigation was the responsibility of Competition Commissioner Margrethe Vestager.
“I am not interfering or involved in any way in these procedures because the Competition Commissioner enjoys large degree of autonomy […] I should not be involved in any way for ethical reasons,” he said.
“I am President of the Commission but I am not going to take the place of the Competition Commissioner – that is not my job.”
— Sven Giegold (@sven_giegold) September 17, 2015
Junker was asked whether he has met with tax consultancies, an “unholy alliance” blamed by MEPs for encouraging multinational companies to relocate to less stringent tax regimes.
Once in such tax havens, the multinationals can shift their profits to minimise their tax payments.
“Have I met with tax consultants? Never,” said Juncker. “I am one of the very few people in this room who hasn’t! I see that tax consultants have a lot of communication with members of the European Parliament.”
But after a question by German MEP Fabio De Masi, Juncker did admit to meeting Commerzbank and Luxair to discuss the bank’s tax burden.
“I have met with banks and Commerzbank. It would be pretty normal [to do so] when prime minister and finance minister, especially in a country where financial institutions play a very important role,” he said.
“But I never talked about the tax arrangements that Commerzbank might have.”
Juncker defended his past and present record on tax evasion and avoidance, saying tax evasion, tax avoidance and tax rulings were a priority for the Commission.
Tax rulings and agreements did give companies predictability, which was important for investment, he said, but the system had been abused. A framework was needed to stop that, he said.
“The system we have at (the) moment is a system which has become unusable and unjust,” said Juncker. “We need to get a better idea of how multinational corporations are behaving.”
Juncker clashed with German Green MEP Sven Giegold. Giegold interrupted Juncker, accusing him of dodging a question about access to minutes from meetings on tax by EU finance ministers and the Commission.
Questions cut short
The hearing began 15 minutes late because of an emergency plenary vote on the migration crisis with about 20 questions from MEPs.
Juncker said he would have to give short answers to the questions, adding, “This will give you the opportunity to tell the press didn’t answer your questions.”
After a second round of questions, Juncker handed over to Taxation Commissioner Pierre Moscovici to answer them, and left.
“I always agree with him even when he is wrong,” Juncker said before citing his busy schedule as an excuse.
Before he left, Juncker quickly added, “The phenomenon dubbed Luxleaks is much wider than that and therefore we need new terminology.”
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