(Bloomberg) European Commission President Jean-Claude Juncker sought to blunt an early challenge to his leadership by rebutting allegations that he presided over sweetheart corporate tax deals during almost 19 years as prime minister of Luxembourg.
Juncker said he won’t interfere with a European Union probe of his country’s potentially unlawful tax breaks. The investigation may be widened after last week’s disclosures by a journalists’ group that Luxembourg helped more than 340 companies shave tax bills.
“I don’t understand how some papers can write Juncker vs. Juncker,” he told reporters in Brussels. “There is no conflict of interest.”
The “LuxLeaks” revelations drag Juncker back into his past less than two weeks after he took over the EU’s executive arm with plans to shore up the economy and stem the anti-European mood that has engulfed the bloc in the aftermath of the euro debt crisis.
Juncker ended almost a week of silence after the publication by the International Consortium of Investigative Journalists of almost 28,000 documents that outlined preferential tax arrangements offered by Luxembourg, the EU’s second-smallest state.
While companies took advantage of “divergent norms,” Juncker said Luxembourg’s tax authorities operated in a way that “corresponds to national law and to internationally applicable rules.” As finance and prime minister, Juncker said, he had no involvement in tax rulings.
“There is nothing in my past indicating that my ambition was to organize tax evasion,” Juncker said.
Juncker went on the offensive with a proposal to require EU governments to share special tax rulings with each other, closing loopholes that enable multinational companies to set up special financing vehicles and shop around for the lowest tax rates.
Such legislation would end the “well-established practice” in which 22 European governments offer companies rarely publicized tailor-made tax concessions, Juncker said. EU-wide tax legislation requires the approval of all 28 EU governments.
Juncker said he will take the proposal along to the Group of 20 meeting in Brisbane, Australia later this week in an effort to make it global.
Juncker also backed a proposal for a common method for calculating corporate income, which would make it harder for companies to play tax jurisdictions off against each other. That proposal has been moribund for years, with countries such as Britain and Ireland objecting to EU-wide tax harmonization.
Luxembourg, with about 550,000 people, has retooled itself as a financial and services center since the demise of the coal and steel industry in the 1970s. Juncker joined the government as labor minister in 1984, later serving as finance minister. He was prime minister from 1995 to 2013.
The new commission inherited a probe of tax breaks for Amazon.com Inc. and Fiat Finance & Trade in Luxembourg, for Starbucks Corp. in the Netherlands and for Apple Inc. in Ireland. All four companies have denied being shown favoritism. The probe will be conducted by Competition Commissioner Margrethe Vestager, a former economy minister of Denmark.
Juncker cited his record in fighting tax fraud in Europe, including his role in authoring a 1997 “code of conduct” that bars governments from fashioning “unfair” tax policies designed to steal jobs from elsewhere. He said he has been wrongly singled out, noting that the media haven’t connected the Netherlands’ representative on the commission, Frans Timmermans, with the Dutch case.
Timmermans, the commission’s principal vice president and Juncker’s deputy, said, “I don’t think you will be seeing any situation whereby he will be standing down for any amount of time.” German Chancellor Angela Merkel has “confidence” in Juncker, spokeswoman Christiane Wirtz told reporters in Berlin.
Juncker won widespread support in the European Parliament, which played a key role in getting him the top commission post. Mainstream parties echoed Juncker in shifting the focus from Luxembourg to the tax practices of European governments generally.
Juncker also resisted a call to complete the commission’s tax-break investigation of Luxembourg, the Netherlands and Ireland by the end of the year, saying that would violate his pledge not to interfere.
In a hastily scheduled debate, the Liberals urged a special parliamentary committee to probe tax evasion in Europe. The only call for Juncker to quit came from the U.K. Independence Party, which wants to pull Britain out of the EU.
“We have already a lame duck in Washington, it’s not necessary to make a lame duck here,” said Guy Verhofstadt, head of the Liberals and one of the candidates defeated by Juncker in the commission presidency race.
—With assistance from Gaspard Sebag and Aoife White in Brussels, Stephanie Bodoni in Luxembourg and Rainer Buergin in Berlin.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access