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News : EU Economy Last Updated: Jan 15, 2015 - 1:37 PM

European Parliament likely to establish special committee on tax evasion/ avoidance
By Michael Hennigan, Finfacts founder and editor
Jan 15, 2015 - 1:34 PM

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Following revelations last November about Luxembourg's system of extensive corporate tax avoidance for multinational corporations, a quarter of members of the European Parliament were reported on Wednesday to have backed a proposal from the Greens to set up a special inquiry committee on tax evasion and avoidance.

In November a trove of almost 28,000 documents mainly from the offices of Pricewaterhouse Coopers (PwC), which has a staff of about 2,000 in the Grand Duchy of 543,000 people,  showed that over 340 foreign multinationals were beneficiaries of rulings made by one civil servant - see here - that reduced taxes on profits made elsewhere to lower than 1%  in some cases.

Jean-Claude Juncker, the architect of the Luxembourg tax haven, was prime minister from 1995 to 2013, as well as minister for finance from 1989 to 2009.

Juncker became president of the European Commission on November 1 and spoke to the media a week after the leaks:  “I am not the architect of the Luxembourgish model,” he said, adding that the Grand Duchy’s tax authority had acted on an “autonomous basis” with little oversight from the government. But he conceded he was “politically” responsible for the affair.

He also proposed a “common tax base” which would help reduce the differences between member states’ tax codes, that companies exploit to cut their overall tax bills and he also called for transparency on tax rulings. “If we can reach agreement on that, then many problems disappear,” said Juncker.

The European Commission president overcame a vote of censure in the Parliament but a special committee would cover other countries including Ireland.

“This is not a committee against Mr Juncker,” said Greens/EFA co-president Philippe Lamberts, speaking to the press in Strasbourg according to EuroActiv.

“We are not the enemy of Mr Juncker, we are the enemy of tax evasion,” he added, noting that it is time to put an end to the tax competition war among member states as it is hampering the proper implementation of the single market.

The Financial Times says senior MEPs say the groundswell of opinion makes it all but impossible to stop a full inquiry, which is likely to include public hearings with top politicians and chief executives. It adds that Parliament’s main political group leaders had assured Juncker privately last year that they would stop an inquiry that might politically embarrass him over Luxembourg’s hosting of large-scale tax avoidance.

However, the leaders were unable to win support of all their members.

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