The European Commission president Jean-Claude Juncker faced a meticulous questioning about his current and past record on tax transparency and justice at a hearing of the European Parliament Committee of Inquiry into Money Laundering, tax Avoidance and Tax Evasion (PANA).
The former finance minister and prime minister of Luxembourg was questioned by PANA, also known as the Panama Committee, chaired by German MEP Werner Langen, over his personal responsibility for Luxembourg's controversial tax regime under his leadership and the ongoing Commission initiatives on tax justice.
MEPs criticised Junker's role as Luxembourg’s prime minister in enabling tax dumping by large companies and blocking legislative initiatives to change the European tax regime. They also questioned his credibility in the fight for tax justice as president of the European Commission.
“Juncker is a rather catastrophic symbol for the European Union,” French Green MEP Eva Joly said. “He represents hypocrisy and the fact that the EU is completely oriented towards helping multinationals.”
Juncker was thrust into the spotlight in 2014 when the LuxLeaks scandal singled out Luxembourg as a tax haven for 300 multinational companies, including Ikea and Pepsi. Juncker admitted in December 2014 he was weaker following those Luxleaks revelations.
The Greens/ European Free Alliance (EFA) Group had recently published a study on Luxembourg’s tax practices during Juncker's leadership, including tax evasion – which unlike tax avoidance is illegal.
The report has revealed how the Luxembourg government has systematically blocked European laws to prevent tax evasion and obtained exemptions for Luxembourg ultimately costing European countries at least €300m in tax revenue from 2003 onwards.
Juncker said there are countries with a lot more intermediaries than Luxembourg but the Greens/EFA Group report from January says the contrary. In the scathing report the Greens/ EFA said "nobody has been held accountable" for the scandal.
Juncker calmly dismissed the allegations throughout saying that he never struck a tax deal with any company as a Luxembourg minister, that he always believed and still believes in tax competition, and that his credibility should be measured based on his current work.
“I wasn’t responsible for financial and business issues, I never discussed fiscal measures with a company,” he said.
The calm defence of Juncker triggered a fierce response from the PANA committee’s vice chair Fabio De Masi, who insisted that Juncker had an exceptional situation under his control during his tenure in Luxembourg when it came to tax dealings with global corporations.
Juncker remained unfazed, saying: “You are talking about events in the past and tax rulings are negotiated with tax authorities not the ministers.” Juncker then pointed the finger at accountants, lawyers and bankers as the main culprits for promoting tax-dodging strategies for global companies.
One MEP questioned how he had turned from Saul to Paul on the road to Damascus, in terms of his current acceptance of the principle of tax competition, saying that people want a clear statement on what he did in the past.
Juncker said that his former and current positions on the matter were not contradictory, but that he was merely focusing now on ''fair'' tax competition.
“I understand that you would like to know more about the background but I don’t measure my credibility on that basis,” Juncker said. He denied knowing about the practices revealed by the Panama Papers or Luxleaks before they surfaced.
Juncker also claimed a lack of resources has complicated the work of the Commission as only six people deal with financial crimes.
Jacques Nikonoff, professor of economics at the university Paris VIII, said at the release of a petition earlier this year to remove Juncker’s presidency: "Luxembourg Leaks is a gigantic financial scandal involving several hundred agreements between the Grand Duchy's tax office and audit firms on behalf of multinational firms. Consequently, Juncker must leave his position as president of the European Commission. Either he resigns himself if he has a little decency, or the European commissioners appoint another president.”
However, at the PANA inquiry some MEPs praised Juncker's Commission for being the most active yet regarding initiatives to fight tax evasion and avoidance, which has so far created 12 pieces of legislation for tax justice, with the 13th targeting intermediaries expected to be implemented in January 2019.
Multinational companies can expect the European Commission to crack down on sweetheart tax deals after handing Apple a demand for €13bn in August, also with decisions made against Fiat in Luxembourg, and Starbucks in the Netherlands of fines up to €30m.
Greens/EFA Group and MEP Sven Giegold commented following the hearing: “It is disappointing that Juncker has refused to accept responsibility for past mistakes or admit the error of his ways. He may be blind to the past, but he's now made some concrete commitments for the future."
Greens/EFA Group report here