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EU’s Juncker warned about Luxembourg tax deals in 1997: letter

European Commission chief Jean-Claude Juncker was alerted in 1997 about the risks of tax breaks his then government in Luxembourg granted multinationals, according to a document obtained by AFP on Thursday.

Juncker, who was Luxembourg prime minister for nearly 20 years, sent a letter to Fabio de Masi, a German leftist member of the European Parliament, containing a page from a secret 1997 report on the tiny duchy’s fiscal practices.

In the report, Jeannot Krecke, then a member of the duchy’s parliament, asked Juncker, who was both premier and finance minister, to closely monitor the activities of “bureau 6,” which dealt with taxation of multinationals.

According to the page, Krecke stressed that if the tax rulings were not questionable on their own, they should be accompanied by “a maximum of guarantees” to make sure they did not contradict tax law.

Luxembourg has always defended the legality of the secret tax rulings that allowed multinationals to know in advance how much they would be taxed.

The commission headed by Juncker has since vowed to fight rampant tax avoidance throughout the EU by multinationals in the wake of the LuxLeaks scandal.

The scandal last year revealed that some of the world’s biggest companies — including Pepsi and Ikea — had lowered their tax rates to as little as one percent in secret pacts with tax authorities in Luxembourg.

The revelations, unearthed by a consortium of investigative journalists, were a huge embarrassment to Juncker, who had just become commission president.

Under the new regime proposed by the Commission, member states would be forced to reveal tax rulings made with companies to other bloc members automatically every three months.

One of the pages of the report on tax rulings remained secret for 18 years.

Krecke had deliberately removed the chapter on tax rulings from the official version published in 1997 in order not to offend then premier Juncker, as Luxembourg prepared at the time to assume the rotating presidency of the EU.

Juncker told a European Parliament committee that he did not know the page’s contents when he was asked about it in mid-September, just before becoming commission president.