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EU vows tax reform as Juncker heads to G20

Published on 13/11/2014

The European Commission unveiled a new push to fight tax evasion on Thursday as questions lingered over Commission head Jean-Claude Juncker's role in enabling companies to pay less tax during his 19 years as Luxembourg premier.

The “political timing is now right” for tax reform, said Commission spokesman Margaritis Schinas, a day before Junker heads to Brisbane, Australia for a G20 summit aimed at tightening global tax rules.

On Wednesday, Juncker broke a week-long silence following the revelation that Luxembourg allowed hundreds of top companies — including Pepsi, IKEA and Deutsche Bank — to enjoy preferential tax treatment.

Among the hundreds of special arrangements, revealed in an international journalistic investigation, were cases that left tax bills as low as 1.

0 percent of earnings for some of the world’s richest companies.

Juncker, who took his Brussels post on November 1, denied he was the “architect” of the system and vowed to fight “unfair” tax evasion as head of the EU’s executive.

To do so, Juncker tasked economic affairs commissioner Pierre Moscovici to draw up plans to create an EU-wide automatic exchange of information on tax arrangements.

For now, EU countries can hold corporate tax deals, known as “tax rulings”, secret, allowing companies to shop around and “arbitrate” between different national tax regimes.

The commission also decided to revive a plan that would allow multinationals operating in the EU to streamline tax payments by providing a common tax base across member states.

The scheme, which would require far greater transparency on tax matters, was launched in 2012 but quickly left for dead by reluctant members states.

“It’s time to give it a new life,” said Schinas.

Both ideas would require the approval of EU member states, hardly a given in a bloc where tax policy remains a valued national power.

With the decision to push for tax reform, the commission is attempting to blow back the tax controversy, known as “Lux Leaks.

“The move could also potentially embarras British Prime Minister David Cameron, who fiercely opposed Junker’s nomination to the top commission job this summer.

Britain has come out very strongly against the tax practices of corporate multinationals, but also harbours its own low tax territories such as the British Virgin Islands or Gibraltar, where, like Luxembourg, major multinationals channel their finances.

The pressure on Juncker remained on Thursday with reports that the former premier, a veteran of backroom European politics, had implicated himself personally in Luxembourg’s tax policy.

Juncker told journalists Wednesday he had no “personal involvement” with any of the arrangements.