It's hardly the first time the European Commission's current president has come under fire for backing special tax deals, but a new set of revelations this week have shed light on Germany's long frustrations in trying to change the system.
On Monday, leaked German diplomatic cables placed European Commission President Jean-Claude Juncker under renewed scrutiny for his alleged role in transforming Luxembourg into a tax haven.
During Mr. Juncker’s tenure as prime minister, Luxembourg frequently led efforts to bloc the European Union from adopting stricter corporate tax standards, according to a report by The Guardian, which cited German diplomatic cables obtained by the International Consortium of Investigative Journalists.
The commission has been under pressure and has consistently gone after tax avoidance since 2014. Sven Giegold, European Parliamentarian, Green Party
Luxembourg wasn't the only one, as the cables show, offering a window into German officials' anger at a failure to crack down on the practice.
Many member states, not just Luxembourg, continue to block tougher E.U. corporate tax standards. It is why German Finance Minister Wolfgang Schäuble, for example, prefers to address the issue within the global framework of the G20 rather than the European Union.
Mr. Juncker led Luxembourg, the European Union’s second-smallest member state, from 1995 until 2013. He also led the treasury and finance ministries during his nearly 20-year tenure as prime minister.
During this time, Luxembourg frequently blocked the work of the code of conduct group on business taxation, according to the confidential German diplomatic cables cited by The Guardian.
The code of conduct group was established in 1998 to prevent E.U. member states from setting up arrangements that help multinational corporations avoid tax obligations. Even small states such as Luxembourg can block the group’s work due to its unanimous decision-making rules.
One leaked cable criticizes the member states in general, but singles out Luxembourg: “It has become abundantly clear once again that a majority [of members states] are not interested in real reform. In particular, Luxembourg representatives said they would fundamentally object to any proposal to publish arguments made by Luxembourg in the committee.”
From the beginning of his tenure as commission president, Mr. Juncker has been dogged by allegations that he helped turn Luxembourg into a tax haven while prime minister.
A 2014 investigation by the International Consortium of Investigative Journalists, based on 28,000 leaked documents, revealed how authorities in Luxembourg helped hundreds of corporations such as Amazon avoid taxes through legal, though highly controversial, arrangements.
The European Commission came under fire again last September when leaked documents revealed that former E.U. commissioner Neelie Kroes failed to disclose her role in an offshore company while she was serving as the E.U. anti-trust czar.
“The commission has been under pressure and has consistently gone after tax avoidance since 2014,” Sven Giegold, a Green Party representative in the European Parliament, told Handelsblatt.