Home News EU’s Juncker on defensive as new ‘LuxLeaks’ drag in Disney

EU’s Juncker on defensive as new ‘LuxLeaks’ drag in Disney

Published on 10/12/2014

EU Commission chief Jean-Claude Juncker was back under the spotlight Wednesday after new revelations showed Disney, Microsoft and Koch Industries got bumper tax deals from Luxembourg when he was prime minister.

They were among dozens of companies dragged into the Luxembourg tax avoidance “LuxLeaks” scandal with the release of new documents by investigative journalists on Tuesday.

The revelations — including that entertainment giant Disney, the home of Mickey Mouse, paid just over a quarter of one percent in tax — increase pressure on Juncker over Luxembourg’s tax policies during his 19 years in office.

They came before Juncker’s swearing-in Wednesday as president of the commission, in a ceremony in Luxembourg.

In his defence, European Commission spokesman Ricardo Cardoso said Juncker is “dedicated and committed to the strategy of looking into unfair tax competition” throughout the European Union.

In an interview published earlier Wednesday, Juncker said he had been “weakened” by the scandal.

“Subjectively speaking, I have no more to answer for than others,” Juncker told the French daily Liberation.

“But objectively speaking, I was weakened because ‘LuxLeaks’ suggests I was party to manoeuvres that do not meet the basic standards of ethics and morality.”

But Cardoso rejected suggestions that Juncker, who easily survived a vote of confidence in the European Parliament in November, might stand down.

“Naturally Mr. Juncker will carry on with his duties,” Cardoso added. “He remains the president and remains 100 percent committed to both his job and his political guidelines.”

– ‘Aggressive tax planning’ –

Commission spokeswoman Vanessa Mock added that the commission would promote tax harmonisation “in order to fight avoidance and aggressive tax planning.”

The first installment in November revealed hundreds of the world’s biggest companies brokered secret deals with Luxembourg to avoid paying billions of dollars in taxes.

The new claims emerge from 28,000 pages of documents obtained by the International Consortium of Investigative Journalists (ICIJ), and examined by dozens of newspapers.

The new documents detail “aggressive tax structures” brokered for major companies by accountants Ernst & Young, KPMG, PwC and Deloitte between 2003 and 2011, when Juncker was in office.

They contain confidential “tax rulings” from Luxembourg officials that “assure companies they will get favourable treatment for their tax-saving manoeuvres”, according to the ICIJ.

The reports claim internet calling business Skype, owned by Microsoft, used an Irish subsidiary to allow its Luxembourg unit to report no corporation tax over five years.

Meanwhile, Koch Industries — owned by the powerful US conservative political donors the Koch brothers — and the Walt Disney Company had complex arrangements to channel “hundreds of millions of dollars in profits through Luxembourg” from 2009 to 2013 and pay little tax, the ICIJ said.

Canadian aerospace giant Bombardier and communications firm Telecom Italia are also named in the documents, according to Belgian newspaper Le Soir, which reported that Disney was afforded a 0.28 percent tax rate in the arrangements.

– ‘Corrosive deals’ –

British newspaper The Guardian reported the documents name major consumer goods company Reckitt Benckiser and Lycra company Invista, owned by the Koch brothers.

The scandal has increased political pressure to address tax avoidance, and on Tuesday investigative journalists called on Juncker to make company ownership transparent.

“The ‘LuxLeaks’ scandal is a recent example of the kind of corrosive deals that big companies are able to extract from countries when they think no one will see,” the dozens of international journalists wrote in the open letter.

The November leaks, which named companies including Apple, Pepsi, IKEA and Heinz as tax breaks beneficiaries while Juncker was prime minister, hit less than a week after he took office at the head of the European Commission.

Juncker conceded then that while he was “not the architect” of the problem, he was “politically responsible” for Luxembourg’s tax practices as prime minister.

The European Commission has fought back on the issue, announcing agreements on Tuesday to close loopholes and to ensure the exchange of tax information between the EU’s 28 member states.

Since June, the commission has also launched investigations into the tax affairs of Amazon and Fiat in Luxembourg, Apple in Ireland and Starbucks in the Netherlands to determine whether sweetheart tax deals could constitute illegal state aid.