‘Luxleaks’ could lead to Brussels action on tax policy

The European Commission’s central function appears increasingly to be the accumulation of power in its own hands. One thing is certain: the EU’s unelected executive passes up no opportunity to undermine the ability of member state governments to take decisions, or execute policies for which people presumably voted. Dutch Socialist Party (SP) and United Left Group/Nordic Green Left (GUE/NGL) Euro-MP Dennis de Jong looks at the Juncker Junta’s latest power-grab.  

Desperate needs lead to desperate deeds, as a cornered rat will demonstrate. This applies also to European Commission president Jean-Claude Juncker. Leaked documents have revealed how Luxembourg concludes deals with multinationals looking to use the Grand Duchy to evade taxes. Juncker was not only in the past long-term Prime Minister of the country but also its Finance Minister. He must therefore have had knowledge of this. Reason enough for quite a few MEPs to demand his resignation. I predict, however, that Juncker will go on the attack and come out with an action plan against tax evasion. In that way he will kill two birds with one stone, showing that he has changed his ways and at the same time ensuring - in relation now also to tax policy - that the member states will lose powers over tax policy. National democracy will then be the real loser.

Many people reacted with pleasure when the European Commission announced the start of an enquiry into the tax deals that Luxembourg, the Netherlands and Ireland had made with multinationals. The SP is also against such deals, because they mean that by all sorts of handy tricks big corporations can pay hardly any tax. If the multinationals were for once to contribute to the societies in which they are happy to continue raking in profits, governments would suddenly find themselves with a great deal more revenue.

The Commission began its enquiry, however, in the framework of competition policy: tax deals had to risk creating unfair competition.  By using this as the sole legal basis, the Commission knows that it is hitting the member states in an area – competition policy – where Brussels has exclusive power. The member states have no say in this, which means that, should the Commission adjudge that certain tax deals do represent unfair competition, the member state involved can be hauled into court and revision or withdrawal of these deals may be enforced.

One of the member states where the Commission has begun its enquiry is Luxembourg. In the wake of ‘Luxleaks‘, this is putting a great deal of pressure on the country. And it’s remarkable in itself that this country which for years has maintained its tax deals must now put an end to this kind of practice. It’s hardly credible, but Juncker will continue to insist that the tax deals were never illegal. Formally that could be the case, because the club of rich countries, the OECD, is only now working out an action plan against tax evasion. The new rules will be stricter, but ‘Luxleaks’ concerns deals from before this time.

With other MEPs I am trying to get a motion in demanding Juncker’s resignation. I don’t think our chances of success are all that great. The social democrats are critical of Juncker, but are looking for some way of leaving him in the saddle without losing face. That’s why I’m predicting that Juncker will want to show that, in the area of tax policy too, he can be really decisive. On that basis I expect to see an action plan which will be looking to transfer to the Commission a great many matters which to date have been in the hands of the member states. This will not only deal with tax deals and taxation treaties, but will probably also involve a further alignment of the basic rules governing corporation tax and the rates charged.  All of this will be done under the guise of showing how credible Juncker is, while at the same time and for the umpteenth time using an incident to increase Brussels’ power.

It is therefore more important than ever to be vigilant. Not the European Commission but the OECD is the body which should take the lead in the fight against tax evasion and tax avoidance. If the OECD countries are in agreement on a package of measures, the Commission can along with the member states elaborate these further, but beyond this, tax policy should remain a national affair. If we wish to combat the growing gap between rich and poor, we don’t need the European Commission’s meddling. We can certainly tackle the multinationals and the super-millionaires ourselves.  

Dennis de Jong is a Member of the European Parliament. This article was translated by Spectrezine editor Steve McGiffen.