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Jean-Claude Juncker Breaks Silence Over Luxembourg Tax Issues Jean-Claude Juncker Breaks Silence Over Luxembourg Tax Issues
(about 4 hours later)
BRUSSELS — Jean-Claude Juncker, head of the European Union’s executive arm, took responsibility on Wednesday for the way Luxembourg was run during his time in charge, breaking his silence after a flood of embarrassing revelations about his home country’s role as a global tax haven.BRUSSELS — Jean-Claude Juncker, head of the European Union’s executive arm, took responsibility on Wednesday for the way Luxembourg was run during his time in charge, breaking his silence after a flood of embarrassing revelations about his home country’s role as a global tax haven.
Mr. Juncker, who was variously or simultaneously finance minister, treasury minister and prime minister of Luxembourg from 1989 to 2013, also criticized practices in other European countries that allowed companies to benefit from unfairly low tax rates.Mr. Juncker, who was variously or simultaneously finance minister, treasury minister and prime minister of Luxembourg from 1989 to 2013, also criticized practices in other European countries that allowed companies to benefit from unfairly low tax rates.
But there was nothing in his past to suggest that his “ambition was to organize tax evasion in Europe,” Mr. Juncker said at an unscheduled appearance at a daily news conference at the headquarters of the European Commission, which he now leads.But there was nothing in his past to suggest that his “ambition was to organize tax evasion in Europe,” Mr. Juncker said at an unscheduled appearance at a daily news conference at the headquarters of the European Commission, which he now leads.
Mr. Juncker has faced a growing furor since Nov. 5, when the International Consortium of Investigative Journalists published its findings after reviewing nearly 28,000 pages of confidential documents. The consortium’s report accused more than 300 companies, including the Pepsi Bottling Group, Ikea and FedEx, of benefiting from preferential tax deals with the government of Luxembourg.Mr. Juncker has faced a growing furor since Nov. 5, when the International Consortium of Investigative Journalists published its findings after reviewing nearly 28,000 pages of confidential documents. The consortium’s report accused more than 300 companies, including the Pepsi Bottling Group, Ikea and FedEx, of benefiting from preferential tax deals with the government of Luxembourg.
The leaked documents reviewed by the consortium, which have led to calls for Mr. Juncker’s resignation, included 548 private tax rulings — sometimes known as “comfort letters” — that the consortium said Luxembourg had provided to corporations seeking favorable tax treatment.The leaked documents reviewed by the consortium, which have led to calls for Mr. Juncker’s resignation, included 548 private tax rulings — sometimes known as “comfort letters” — that the consortium said Luxembourg had provided to corporations seeking favorable tax treatment.
On Wednesday, Mr. Juncker accepted that he was “politically responsible for what happened in each and every corner and quarter of that country” when he was running Luxembourg.On Wednesday, Mr. Juncker accepted that he was “politically responsible for what happened in each and every corner and quarter of that country” when he was running Luxembourg.
But Mr. Juncker also said, apparently referring to the tax system in his home country, that he was “not the architect of what you could call the Luxembourgish model, because this Luxembourgish model doesn’t exist in a full-fledged way.”But Mr. Juncker also said, apparently referring to the tax system in his home country, that he was “not the architect of what you could call the Luxembourgish model, because this Luxembourgish model doesn’t exist in a full-fledged way.”
He also said that companies that benefited from rulings offering very low or no taxes were taking advantage of “the interaction between divergent national” laws, which was not the fault of Luxembourg or its administration.He also said that companies that benefited from rulings offering very low or no taxes were taking advantage of “the interaction between divergent national” laws, which was not the fault of Luxembourg or its administration.
If those differences in tax regimes between countries were “leading to a situation of nontaxation, then I would regret that,” he said. He also acknowledged making “a mistake” by taking a week to respond to the revelations.If those differences in tax regimes between countries were “leading to a situation of nontaxation, then I would regret that,” he said. He also acknowledged making “a mistake” by taking a week to respond to the revelations.
Later on Wednesday Mr. Juncker addressed the European Parliament, where some lawmakers underscored that the revelations would further stoke the anger of ordinary citizens who are reeling from the effects of austerity measures.Later on Wednesday Mr. Juncker addressed the European Parliament, where some lawmakers underscored that the revelations would further stoke the anger of ordinary citizens who are reeling from the effects of austerity measures.
“My first feeling, reading about the clever tricks played by multinationals — even when one is aware of the fact that these things are being done — is indignation,” said Gianni Pittella, the leader of the Socialists and Democrats group in the Parliament.“My first feeling, reading about the clever tricks played by multinationals — even when one is aware of the fact that these things are being done — is indignation,” said Gianni Pittella, the leader of the Socialists and Democrats group in the Parliament.
“Some states, including Greece, are being put through the mill in the name of austerity” Mr. Pittella said. “In other parts of Europe, multinationals that should be paying millions of euros, or billions of euros, into public coffers aren’t paying their taxes.”“Some states, including Greece, are being put through the mill in the name of austerity” Mr. Pittella said. “In other parts of Europe, multinationals that should be paying millions of euros, or billions of euros, into public coffers aren’t paying their taxes.”
Even so, Mr. Pittella said that asking Mr. Juncker to step down would only strengthen the hand of groups seeking to weaken European Union institutions like the commission.Even so, Mr. Pittella said that asking Mr. Juncker to step down would only strengthen the hand of groups seeking to weaken European Union institutions like the commission.
In his earlier news conference, Mr. Juncker pointed out that European governments had so far failed to create a so-called common consolidated corporate tax base — a single set of rules that companies operating in the European Union could use to calculate taxable income — as proposed by the European Commission in 2011.In his earlier news conference, Mr. Juncker pointed out that European governments had so far failed to create a so-called common consolidated corporate tax base — a single set of rules that companies operating in the European Union could use to calculate taxable income — as proposed by the European Commission in 2011.
Mr. Juncker also announced his backing for a legislative initiative that would require the 28 member states of the European Union to commit to automatically exchanging information on the kinds of tax rulings that have drawn criticism in the past week. That legislation was “an idea I have been toying with for some time,” he said.Mr. Juncker also announced his backing for a legislative initiative that would require the 28 member states of the European Union to commit to automatically exchanging information on the kinds of tax rulings that have drawn criticism in the past week. That legislation was “an idea I have been toying with for some time,” he said.
Solving corporate tax avoidance “can’t be a Luxembourgish answer — it has to be a European answer,” he said.Solving corporate tax avoidance “can’t be a Luxembourgish answer — it has to be a European answer,” he said.
Some have also voiced concern that Mr. Juncker has conflicts of interest. As president of the European Commission, he now oversees the officials investigating the tax incentives Luxembourg offered to Amazon and to a unit of Fiat. Those investigations, concerning so-called state aid, also focus on Apple in Ireland and Starbucks in the Netherlands.Some have also voiced concern that Mr. Juncker has conflicts of interest. As president of the European Commission, he now oversees the officials investigating the tax incentives Luxembourg offered to Amazon and to a unit of Fiat. Those investigations, concerning so-called state aid, also focus on Apple in Ireland and Starbucks in the Netherlands.
On Wednesday, Mr. Juncker flatly refused to recuse himself from taking part in the final decision in those investigations but pledged to allow them to proceed unimpeded.On Wednesday, Mr. Juncker flatly refused to recuse himself from taking part in the final decision in those investigations but pledged to allow them to proceed unimpeded.
“If I were to be seen as exerting undue influence, the result of that would be a massive loss of my authority as president of the commission,” he said.“If I were to be seen as exerting undue influence, the result of that would be a massive loss of my authority as president of the commission,” he said.
Asked what would happen if he were to become the subject of the tax inquiries and if he faced questioning about his personal role in tax rulings in Luxembourg, Mr. Juncker responded that he would make himself answerable to Margrethe Vestager, the European Union’s competition commissioner.Asked what would happen if he were to become the subject of the tax inquiries and if he faced questioning about his personal role in tax rulings in Luxembourg, Mr. Juncker responded that he would make himself answerable to Margrethe Vestager, the European Union’s competition commissioner.
Mr. Juncker also pledged that his deputy, Frans Timmermans, a former finance minister of the Netherlands, would not interfere in Ms. Vestager’s investigation of the tax affairs of Starbucks in that country. Mr. Juncker also pledged that his deputy, Frans Timmermans, a former foreign minister of the Netherlands, would not interfere in Ms. Vestager’s investigation of the tax affairs of Starbucks in that country.
“The commission in the past has always clearly been independent in these assessments,” Mr. Timmermans said at the same news conference on Wednesday at which Mr. Juncker spoke.“The commission in the past has always clearly been independent in these assessments,” Mr. Timmermans said at the same news conference on Wednesday at which Mr. Juncker spoke.