Luxembourg tax files: Juncker ‘solved problems’ for Amazon move / Luxembourg tax files: can Jean-Claude Juncker weather the storm? / Guardian

There is mounting controversy around Luxembourg’s accommodating approach to multinationals’ tax planning. Photograph: Frederick Florin/AFP/Getty Images

Luxembourg tax files: Juncker ‘solved problems’ for Amazon move

Web retailer’s former tax expert claims EU chief presented himself as a business partner who ‘helped solve problems’

Simon Bowers and Nicholas Watt

The Guardian, Wednesday 10 December 2014 / http://www.theguardian.com/world/2014/dec/10/juncker-amazon-luxembourg-eased-tax-expert-comfort

Pressure is mounting on Jean-Claude Juncker, the European commission president, after fresh allegations emerged outlining the tactics he used when he was prime minister of Luxembourg to promote the country as the destination for multinational corporations.

Bob Comfort, the former head of tax for Amazon, claimed Juncker had fiercely courted the online giant, behaving as a “business partner” and “helping solve problems”. Months after arriving in Luxembourg in 2003, Amazon secured a confidential deal from the local tax office. Two months ago that deal became the subject of a formal investigation by the European commission.

In an interview with the Luxembourg newspaper d’Lëtzebuerger Land, Comfort said: “The Luxembourg government presents itself as business partner, and I think it’s an accurate description: it helps to solve problems.”

He recalled meetings with top civil servants from the finance ministry and Juncker, who was then serving as both prime minister and finance minister. “His message was simply: ‘If you encounter problems which you don’t seem to be able to resolve, please come back and tell me. I’ll try to help.’”

Shortly before he retired from Amazon this summer, Comfort took on the additional role of Luxembourg’s “honorary consul for the Seattle region”. An official announcement noted he had “a long-standing relationship with Luxembourg”.

The mounting controversy around Luxembourg’s accommodating approach to multinationals’ tax planning came as George Osborne revealed details of a new “diverted profits tax”. The new tax, also called the Google tax, was announced in the autumn statement last week and the chancellor has claimed it will raise £1bn in the next five years. The new measures will target companies shifting profits out of the UK in artificial ways, with a punitive 25% tax rate from April next year.

A Treasury source said: “HMRC already has a pretty good idea of the companies that use these kind of structures and will be issuing notices to those companies. Companies then have 30 days to dispute the payment but if HMRC believes they are using the structure they would have to pay immediately. Obviously there may be companies that may not be on HMRC’s radar. We would expect them to report to HMRC that they are using these structures. If they don’t, that would be illegal.”

The Treasury expects the tax to hit companies such as Amazon and Google that make billions of pounds from sales to UK customers but book the revenues in companies overseas.

Margaret Hodge, chair of parliament’s public accounts committee, said: “This is an important symbolic statement but it is really on the margins … what you really need is international agreement and a really, really tough, determined HMRC.”

Pressure is building across Europe for tougher, quicker action. European commission investigators have said they believe the 2003 deal with Luxembourg, which is still in use by Amazon – appears to be so generous as to amount to illegal state aid, though inquiries are ongoing.

Amazon EU Sarl, the company with which customers across much of Europe do business when they buy online from the retailer, took €13.6bn (£10.7bn) in sales last year, up from €11.9bn in 2012. The company’s taxable profits were reduced, however, after deductions for royalty payments to another Luxembourg unit, an Amazon-controlled limited partnership, which is not subject to tax in the Grand Duchy.

In a statement to the Guardian, the retailer said: “Amazon has received no special tax treatment from Luxembourg – we are subject to the same tax laws as other companies operating here.”

Last month, just after the commission’s state aid inquiry was revealed, the International Consortium of Investigative Journalists, together with the Guardian and a team of international journalists in more than 20 countries, published investigations into a cache of hundreds of leaked tax deals secured by multinationals with Luxembourg authorities. Many of the deals rubber-stamped complex and aggressive tax avoidance structures that drained the tax coffers of other countries.

This week, a second batch of leaked documents has shed light on tax deals secured for Skype, Koch Industries and others. The widening scandal has led to suggestions that Luxembourg, rather than offering selected multinationals sweetheart deals in contravention of state aid rules, had been engaged in facilitating tax avoidance on an industrial scale.

Juncker has denied the charge. “I am not the architect of the Luxembourg model because this model doesn’t exist,” he said last month, insisting that his government did no more than compete hard for inward investment as others did.

Comfort, who retired from Amazon this year, recalls touring almost every country in western Europe with a small team looking for a regional base in 2003. “The final decision was made at the highest level of the company,” he said. “[Tax] did play a significant role, but it wasn’t the overriding factor.”

Journalist Brad Stone, in his book The Everything Store, described Comfort as the “true architect” of Amazon’s “arcane tax structure … deploying every trick in the book and inventing many new ones”.

Comfort says Amazon did nothing out of the ordinary by locating its European operation in Luxembourg, and has played down the significance of allegations it is not paying sufficient tax. “Governments think they aren’t getting their fair share, but multinationals follow the existing rules of the bilateral treaty system. The government’s unhappiness relates to an arguably outdated legal framework that has been designed for the 20th century.”

Asked what his role as honorary consul for the Seattle region entailed, Comfort said: “I think there are only four Luxembourgers in all of Washington State. So I am rarely called upon to perform consular functions such as helping with visas or bailing people out of jail. My work here is to help attract business to Luxembourg.”

Comfort could not be reached for further comment.

Jean-Claude Juncker’s future as European commission president depends on being seen to be a born-again proponent of fair taxation. Photograph: Stephanie Lecocq/EPA

Luxembourg tax files: can Jean-Claude Juncker weather the storm?

EU political elite will not make life difficult for commission chief, but fate will hinge on the evidence against him

Ian Traynor in Brussels

The Guardian, Wednesday 10 December 2014 / http://www.theguardian.com/world/2014/dec/10/luxembourg-tax-jean-claude-juncker-eu-european-commission

No one in Brussels or other EU capitals is surprised to learn that Jean-Claude Juncker’s Luxembourg was, and is, a tax haven. And no one doubts that the new president of the European commission, a crafty survivor whose political longevity is peerless in Europe, knew enough about the vast tax avoidance schemes practised there, even if he did not bother to master all the fine print.

The question is whether Juncker, a little more than a month into a five-year term as head of the EU executive, can weather the storm and credibly perform a poacher-turned-gamekeeper role of setting up an EU regime to clamp down on tax evasion and avoidance.

There are few leaders in Europe who understand the workings of the EU as well as the former prime minister of Luxembourg. With the exception of Germany’s finance minister, Wolfgang Schäuble, Juncker is the only leader left who took part in the negotiation of the Maastricht treaty more than 20 years ago which dealt with the impact on the EU of German reunification and the process to create the euro.

He has been attending EU summits uninterruptedly for 20 years. No one at the summit table can boast that record. He knows everyone. He has friends everywhere. A fixer, a mediator between France and Germany (needed right now as much as ever); the consummate EU insider, he also knows where the EU’s skeletons are buried.

Asked about the impact of the Luxleaks on Juncker’s credibility and the authority of the new commission, the commission vice-president, Jyrki Katainen, squirmed and left the room. “I trust him,” he told the Guardian. “I’m not in a position to give any advice … We have to focus on what the president has done by himself and not done.”

Last March, the EU’s centre-right leaders, including the paramount leader, Angela Merkel of Germany, met in Dublin and backed Juncker to become the next commission chief after he was unseated last year as Luxembourg’s prime minister.

They will not make life difficult for him now. For them, mayhem at the top of the commission would seriously destabilise an EU desperately trying to come up with policies to drag Europe out of years of crisis, while anti-EU populists give the leaders a hard time across the continent.

The consensus on not rocking the Juncker boat was evident in the European parliament last month. The far-right populists, led by Nigel Farage of Britain’s Ukip, Marine Le Pen of France’s Front National and the Five Star movement mavericks of Italy’s Beppe Grillo, tabled a vote of no confidence in Juncker.

Everyone else held their noses. Even Juncker critics on the left refused to back the motion, while the mainstream Christian and social democrats, and liberals all solidly supported the president.

Juncker took the entire 28-strong commission to the parliament, defended himself after the first round of Luxembourg leaks, and walked away unharmed. Besides, in the endless turf wars waged between rival EU institutions in Brussels, the parliament views Juncker as “its” commission chief – it played a key role in getting him the job in the first place – and will not challenge him too severely.

If there is pressure on Juncker, it will come not from the EU political elite, but from the media in the form of further revelations. Officials and diplomats say his fate will hinge on how compelling the evidence against him is. But the competition department of the commission he heads is also investigating Luxembourg on the grounds that some of the “comfort letters”, tax rulings, and avoidance strategies agreed by his then administration amounted to state aid in breach of EU competition rules. The cases of Fiat and Amazon are being investigated, while Skype may have to be added to what seems certain to become a long, and lengthening list.

Juncker insists his position at the head of the commission will not impair the credibility and impartiality of its investigation.

Rather than jeopardise his position, the political elites in Germany and France and elsewhere will exploit the Juncker scandal to push an agenda bringing more transparency to tax arrangements to counter “tax-dumping” between EU governments.

Juncker claims to be a champion of such moves, suggesting either a Damascene conversion to the cause or a calculation that his political future depends on being seen to be a born-again proponent of fair taxation.

For the moment at least, Juncker looks tarnished by the disclosures, but not really in fear for his job. Although he is free to resign, he cannot be removed as an individual. The entire European commission would have to go, felled by a vote of no confidence in the European parliament. This is a remote prospect at the moment. And for this to happen, national leaders, chief among them Merkel, would have to signal that Juncker’s time is up and then press their allies in the parliament into organising the commission’s collapse. No one in Brussels at present is talking in such terms.