European Commission Jean-Claude Juncker was questioned last Tuesday (30th of May) by the European Parliament’s committee of inquiry into money laundering, tax avoidance and tax evasion (PANA) on Luxembourg’s tax policy during his nearly two decades of service as the Grand Duchy’s Finance Minister then Prime Minister.
MEPs demanded to hear Juncker for a second time to hear his explanation of the allegedly fraudulent tax rulings issued by the Luxembourgish tax authorities under his terms. Luxembourg is well-known for being a tax haven, and it was singled out in the 2014 “LuxLeaks” scandal, where the International Consortium of Investigative Journalists reviewed tens of thousands of confidential documents on special tax rulings for big international companies. These special tax rulings allowed more than 300 companies to pay very small tax bills on their colossal profits in the European Union.
The EC President remained calm during the hearing, even before some fiery accusations from the MEPs. He declined legal responsibility for any wrongdoing during his terms, arguing that “tax rulings are negotiated with tax authorities and not the ministers”. “I never talked to individual companies”, he said to the panel. His strategy was to claim he did not know what happened then, making him innocent.
But the former Prime Minister of Luxembourg could not avoid admitting some political responsibility in this long lasting scandal. His admittance that he and few others “neglected” the dimension of fair competition when coming up with an aggressive tax policy was a small concession to his detractors, and some Green MEPs see it as hypocritical. But it should be enough for the European Parliament to leave him alone for some time. And it opened a window for the other phase of his strategy: taking the offensive.
Jean-Claude Juncker used this highly anticipated hearing to communicate on a dozen of different projects of the Commission to stop tax avoidance and to foster fair competition and cooperation between the national tax authorities, and to reassess that “he believes in fair tax competition”. This bold move was seen as highly hypocritical by some members of the audience, leading the Green MEP and former French presidential candidate Eva Joly to tell Euractiv that “Juncker is a rather catastrophic symbol for the European Union”.
This tax avoidance scandal will probably not end in the close future. Journalists are still investigating the LuxLeaks and the Panama Papers. And OLAF, the EU anti-fraud announced on the 31st of May that four high EU official are being placed under scrutiny vis-à-vis the Panama Papers. After the Neelie Kroes case and the allegations of wrongdoings about Juncker, trust in the institutions might take a blow.