Juncker's Counter-Offensive Turning the Tables

The European Commission head has declared war on tax avoidance in a surprise countermove following allegations he helped firms avoid paying taxes during his time as Luxembourg's premier.
Fighting back.

Jean-Claude Juncker went quiet for five days, and on the sixth day he finally broke his silence – and launched a counter-offensive.

The new president of the European Commission wants to introduce transparency rules to combat tax avoidance by companies in Europe, while at the same time pushing for the harmonization of business taxes.

Mr. Juncker announced his plans in a surprise press conference on Wednesday.

His move was a reaction to massive political pressure. The publication of secret documents last Thursday cast an unfavorable light on Luxembourg's former premier.

Mr. Juncker is suspected of helping 350 companies avoid taxation. He has now taken a stand against those accusations, saying that the special fiscal agreements Luxembourg had made with the companies are common everywhere in the European Union and exist in 22 countries in all. He also argued that such tax rulings are in full compliance with European and international law.

Still, Mr. Juncker conceded that tax avoidance on such a large scale was "not in line with ethical and moral standards." The interplay of different national tax laws could result in the rate of taxation of corporate earnings being very low in the end, he noted.

Now the commission president wants to do everything in his power to fight corporate tax avoidance although, in reality, his powers are limited. The European Union has very little say when it comes to tax policy; E.U. tax guidelines can only be approved unanimously, so that a single country's veto is sufficient to block everything.

That means that Mr. Juncker's success with his new initiative against tax avoidance will depend on the E.U. member states. The commission president wants to introduce an automatic information exchange among E.U. countries on special tax rules for businesses.

The European Union has very little say when it comes to tax policy.

Germany supports this move. Such an exchange of information should be incorporated into the E.U. administrative assistance guideline "quickly and in legally binding fashion," German Finance Minister Wolfgang Schäuble wrote in a letter to Pierre Moscovici, the E.U. commissioner in charge of tax policy.

Mr. Juncker is also urging the E.U. countries to finally agree on a shared assessment basis for corporate income tax. The commission presented a draft bill on the issue in 2013, but E.U. finance ministers have shown little interest in the initiative so far. Whether that will now change is unclear. Mr. Juncker also wants to sound out other possible approaches to combat tax avoidance. Mr. Moscovici has been asked to prepare proposals on the issue, say officials in Brussels.

Reactions to Mr. Juncker's announcements were mixed in the European Parliament. His party, the Christian Democratic European People's Party (EPP), supported him. European parliament lawmakers Herbert Reul, a member of Germany's center-right Christian Democratic Union (CDU), and Angelika Niebler, with the CDU's Bavarian sister party, the Christian Social Union (CSU), called upon E.U. countries to quickly approve a uniform assessment basis for corporate income tax.

For the Social Democrats and the Greens, however, Mr. Juncker's proposals are insufficient. Companies should be forced to disclose their tax payments "country by country," said Udo Bullmann, deputy chairman of the German Social Democratic Party (SPD) group in the European parliament. A uniform assessment basis is not enough, said Green Party lawmaker Sven Giegold, who also called for minimum tax rates in the E.U.

 

Ruth Berschens has been Handelsblatt's Brussels bureau chief since 2009. To contact the author: [email protected]