Taxing questions

Luxembourg in the Spotlight

  • Why it matters

    Why it matters

    While Luxembourg’s finance minister was unapologetic about his country’s controversial corporate-tax practices on stage this week, he has not been questioned for the last time about Luxembourg’s tax-haven status.  

  • Facts

    Facts

    • Pierre Gramegna addressed 120 bankers, auditors and tax advisors during Tuesday’s ‘Finance Center Luxembourg’ conference.
    • Last week, investigative journalists published information from leaked documents that detailed Luxembourg deals that allowed hundreds of international companies to avoid paying billions in taxes.
    • All tax practices in Luxembourg are legal, Mr. Gramegna said at the conference in Munich.
  • Audio

    Audio

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Gramegna

Offense is the best defense. At least that’s what Luxembourg’s finance minister, Pierre Gramegna, seemed to think as he opened Handelsblatt’s Finance Center Luxembourg conference in Munich this week.

“We stand for the free movement of capital,” he told the 120 assembled bankers, auditors and tax advisors. Given recent headlines from his country, it was a brave statement.

Luxembourg and its former prime minister, the newly installed European Commission President Jean-Claude Juncker, have been in the spotlight since last week after media reports detailed a series of longstanding Luxembourg deals that helped hundreds of international companies with headquarters in the country avoid paying billions in European taxes.

Mr. Juncker, who was Luxembourg’s prime minister until the end of 2013, took political responsibility Wednesday for the tax practices, Reuters reported.

On Tuesday, Mr. Gramegna said he understood the explosive nature of the “Luxembourg leaks” that were published by several European newspapers.

He said he had called the prime minister, Xavier Bettel, who told him, “We will survive this.”

Mr. Gramegna asserted that all the tax models in place in Luxembourg are legal.

“A network of national regulations can lead to a company having to pay little or no taxes at all,” he said.

And that is the case in many countries, not only in Luxembourg, he said.

Many in the audience nodded in agreement. Whether it is ethically acceptable is another question, he said.

 

 

It emerged from the leaked documents that many companies had gotten their tax model approved in advance by tax authorities.

Mr. Gramegna said Luxembourg is adhering to the international guidelines of the European Union and Organization for Economic Co-operation and Development regarding illegal tax evasion and supports legal tax structures for its domestic companies.

“Eighteen months ago, Mr. Juncker, the prime minister, announced that we are taking part in the framework of the E.U. Savings Directive for an automatic information exchange,” he said.

Mr. Gramegna supports Luxembourg’s current corporate tax laws.

It emerged from leaked documents that many companies had gotten their tax models approved in advance by tax authorities. That is not unique to Luxembourg, the country’s finance minister said: “A ruling is a one-sided decision of management that verifies which law is applicable for a group. In Germany, it is called a preliminary ruling.”

Later, a banker from DZ Bank confirmed that binding tax information in Luxembourg and Liechtenstein can be obtained quickly. There was a casual consensus between some of the audience that a German firm using a financing company in Luxembourg can really save a lot on the bureaucratic and costly German commercial taxes.

There’s only one topic on which the Luxembourg finance minister declined to say much, perhaps understandably: his boss, Mr. Juncker. To the question of whether Mr. Juncker is the right one for the job, he said, “Most certainly.” And as for the E.U. investigation of Luxembourg’s corporate tax practices: “That is a topic for the whole commission.”

 

Donata Riedel is a finance correspondent at Handelsblatt Berlin. To contact the author: riedel@handelsblatt.com

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