dodgy duchy

Luxembourg’s Shady Business Model

Bockfelsen und Oberstadt mit der Kirche St. Michael, view on the uptown with St. Michael and the Bock rock
Luxembourg, Europe's picturesque tax haven.
  • Why it matters

    Why it matters

    With a global effort to crack down on tax evasion underway, incoming Commission President Juncker will face pressure to act tough on his homeland.

  • Facts


    • The European Union is investigating Luxembourg for effectively providing state aid to online retail giant Amazon.
    • The E.U. Commission says a tax agreement in 2003 known as a “ruling” allowed the company to significantly reduce its tax liability.
    • The Commission is already investigating Ireland and the Netherlands for similar breaches of E.U. rules.
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Which European Union country attracts the most investment money from other countries? The answer: Luxembourg.  Of the €370 billion ($466 billion) invested in 2013, €240 billion went to the tiny country bordering Germany, France and Belgium.

The next question: Which E.U. country invests most in other member states? The answer: Luxembourg again. A total of €213 billion came from the tiny duchy – a good three quarters of all European Union direct investment.

The home country of incoming European Commission president, Jean-Claude Juncker, leaves other countries in the shade when it comes to being a finance center. Almost every private equity company, most multinationals, along with nearly every U.S. pension fund and insurer make sure their money flows through the tiny state when it comes to doing business into and out of Europe.

“Luxembourg: Where else?” is the title of a PwC brochure that mentions “tailor-made” rules for companies and a “total tax rate” that is lower than Ireland’s and only around 40 percent of Germany’s.

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