A new row has erupted over allegations that the incoming President of the European Commission Jean-Claude Juncker has aided and abetted tax evasion on a monumental scale.
Allegations centre on Juncker’s time as Prime Minister of Luxembourg when as many as 340 companies – a number from Portugal, including societies run by the failed Espírito Santo group – took advantage of “secret deals” with tax authorities in Luxembourg which meant they could get away with contributions of under 1%, when the normal IRC company rate is more like 20%.
As Reuters news agency points out, “controversy over the role of Luxembourg as a low-tax conduit for corporate cash has long been a feature of Juncker’s political career. Some weeks ago, the Commission of his predecessor began investigations of tax deals struck there by web retailer Amazon and Italian carmaker Fiat”.
But these latest allegations have seen fraud investigators at DSIFAE (the Portuguese department of fraud and special actions investigation) starting to ask questions.
According to news reports, secretary of state for fiscal affairs Paulo Núncio is also looking into the situation and considering “the application of anti-abuse clauses” which will allow Portugal to tax national companies taking advantage of deals “considered illegal”.
Will this damage Juncker’s standing though? The answer appears to be “not really”.
As his successor in Luxembourg has been at pains to explain, the country’s “low-tax conduit” is “perfectly legal”, as far as they are concerned.
Although the European Commission may have to work fast on “levelling the playing field” when it comes to corporation taxation, Juncker does not appear to have broken any laws.
Needless to say, the story has been manna from heaven for euro-sceptics like Britain’s UKIP party, which described it as “more proof that the EU elite protect their friends in high corporate places”.
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