Confucius, the Chinese philosopher, gave the advice: “Be not ashamed of mistakes and thus make them crimes.” But shame is one of the weapons Philippe Lamberts wants to use to uncover what may well turn out to have been, if not a series of crimes then at least some very serious cases of malfeasance, compounded by people who should have known better turning a judicious blind eye. The Belgian Green MEP wants a Parliamentary Committee of Inquiry into the so-called “Lux-Leaks”, the revelation that some 340 of the biggest names in industry secured special deals with the Luxembourg government to cut their tax bills by huge amounts. Among the firms named in an investigation, conducted by several leading newspapers and broadcasters, are Deutsche Bank, IKEA, Dyson, Amazon, Proctor and Gamble and FedEx, but it’s claimed that the accountants Price Waterhouse Cooper (and others) helped multinational companies obtain more than five hundred tax rulings in Luxembourg between 2002 and 2010. They would point out – correctly – that not one of them has broken the law. Normally it involves having a legal presence in the Grand Duchy, but that can amount to little more than a nameplate on a door. One particular address has more than 1,600 of them.
Mr. Lamberts has obtained nearly two hundred signatures of MEPs, more than the number needed to call for a Committee of Inquiry, despite opposition from some groups. It is highly controversial: even some of those who have lent their vocal support to the idea have not signed up to it. It risks exposing some governments to intense scrutiny. President Martin Schulz’s office had promised an answer by last Wednesday, 28 January, and the fact that it has not been forthcoming causes Mr. Lamberts some concern. “Are they still negotiating,” he rhetorically asked a group of journalists he invited to a briefing, “or is there some problem?”
We’ll know on Thursday, when the Conference of Presidents must make its decision. In fact, a Council Directive obliging member states to notify each other if a national tax arrangement may impact on another EU country has been in place since 1977, reaffirmed in February 2011. It’s called a “spontaneous exchange of information” and it should be triggered, to quote from the 2011 Directive, when “the competent authority of one member state has grounds for supposing that there may be a loss of tax in the other member state” and also if “the competent authority of a member state has grounds for supposing that a saving of tax may result from artificial transfers of profits within groups of enterprises”. So the law is there, has been for nearly four decades but has been systematically ignored. Governments knew it was going on but, Mr. Lamberts suspects, didn’t want to risk upsetting large multinational companies or their CEOs.
What Mr. Lambert and his fellow-signatories do not want is a witch-hunt against individuals, such as Commission President Jean-Claude Juncker, who was Prime Minister and Finance Minister of Luxembourg at the time some of these deals were agreed. “Our objective is the play the ball, not the man,” he said, “Let’s keep someone as head of the European Commission who has something to prove.” He also pointed out that he’s not after scalps, he just wants misdemeanors corrected. “Then we would have a bloodbath with so much blood on the carpet that no-one will want to clean it up afterwards.”
He reminded journalists that a similar if lesser scandal in 2013, known as Offshore Leaks, caused debate in the Council for three months, after which it was forgotten or swept under the carpet, something that cannot happen if he gets his way. “The main point of a Committee of Inquiry is to keep the pressure live,” he said, “what we want is that now they take action.”
A Committee of Inquiry can be launched, according to Annex VIII of the Rules of Procedure, “to investigate alleged breaches or poor application of Community law”. Surprisingly, there have only ever been three since the European Economic Community became the EU: in 1995, to look into alleged maladministration in the Community Transit System, in 1996 to consider Bovine Spongiform Encephalopathy (BSE or Mad Cow Disease) and in 2006 to learn more about the collapse of Equitable Life. This would be the fourth. Once the Conference of Presidents takes its decision the mandate – if it’s approved – will go to the brief Brussels plenary later this month for a decision. Mr. Lamberts hopes that it will win support simply because not supporting it will throw suspicion on the members or groups voting that way. As he put it, “with more transparency, the reputational price goes up.”
He hopes the same fear of appearing to be on the side of tax-dodging multi-nationals will bring a good response from those requested to testify before a Committee of Inquiry. Such a committee has no power to compel witnesses to appear, it must rely on their good will and, perhaps, their fear that non-appearance may be interpreted in the media as guilt. The Luxleaks system appears to have generated huge sums of money for some and helped others avoid paying huge sums of money. Philippe Lamberts is relying on the accuracy of a saying by Publilius Syrus, who, in the first century BC, wrote: “Honesta fama melior pecunia est” – a good reputation is more valuable than money. Want a bet?
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