Luxembourg finance minister defends ‘totally legal’ tax regime

Luxembourg's finance minister staunchly defended his country's tax regime today, arguing that the tax deals revealed in The Irish Times and other media outlets last night were "totally legal." Pierre Gramegna told journalists in Brussels that aggressive tax planning had to be tackled internationally, noting that the problem "cannot be solved by one country alone."

"The situation whereby international companies pay as little tax possible is a situation that is untenable not just for Luxembourg but also for Europe, " Mr Gramegna said, noting that Luxembourg had signed up this week to automatic exchange of information rules. But speaking on his way into the euro group meeting, Dutch finance minister Jeroen Dijsselbloem suggested that the tax deals revealed in the Luxembourg leaks scandal were in breach of international rules. "If today's news coverage is correct, those international standards have not been met," the head of the euro group said.

The EU's new Competition Commissioner Margrethe Vestager said today that her department -which is already investigating Luxembourg's tax arrangements with Fiat and Amazon - had not seen all the information published by the International Consortium of Investigative Journalists (ICIJ). "At this stage [we have]not yet formed an opinion about these rulings and a possible formal follow-up by the Commission," the Danish Commissioner said in a statement.

While defending Luxembourg’s tax arrangements, Minister Gramegna strongly criticised the leaking of 28,000 pages of documents that showed how more than 340 companies benefitted from tax rulings, adding that Luxembourg was considering its legal options in relation to the leak.

"Giving out information about the fiscal situation of people or companies is illegal in Luxembourg. I think it is illegal in most countries of the European Union, " he said. "We're extremely unhappy that this information has been leaked."

Earlier, a European Commission spokesman dismissed claims that Jean-Claude Juncker -who was prime minister at the time when the Luxembourg tax deals were negotiated - had been compromised as head of the European Commission, noting that previous Commission presidents including Jose Manuel Barroso and Romano Prodi had overseen dozens of state aid cases involving their home countries during their tenures.

The spokesman pointed out that member states were free to offer tax incentives to stimulate investment. “The rules of state aid schemes are well-known. This is part of member states’ efforts to stimulate their economies and they will continue to do so. The Commission’s role is to make sure that all these schemes are investigated and the rules of the Treaty applied,” he said, noting that Mr Juncker would “continue to act with Commissioner Vestager in the next five years to ensure that the state aid legislation is properly enforced.”

Mr Juncker cancelled a planned appearance at a debate with former Commission president Jacques Delors today in Brussels, with his spokesman noting that Mr Delors had pulled out of the event due to illness.

Arriving in Brussels for the meeting of euro zone finance ministers today, Minister for Finance Michael Noonan said that it was vital that countries, including Luxembourg, cooperated fully with international moves to tackle corporate tax avoidance, though he noted that there had been no suggestion of illegality in Luxembourg's tax dealing.

“Nobody has suggested...that anything illegal was occurring. It’s a tax avoidance measure and it was [achieved] through the matching of international practices to find a tax avoidance gap. This is what is going on and this is what the OECD and the European Commission must cooperate on to close these gaps.”

Meanwhile EU finance ministers tomorrow are expected to strike a compromise with Britain over its disputed €2.1 billion budget payment, by allowing the country to pay the bill by instalments over 2015.