LUXEMBOURG: EU ministers agreed on Tuesday that national authorities would automatically exchange information on tax deals with multinationals, but critics said failing to make them public means the tax avoidance practices that led to the LuxLeaks scandal would continue.

The new measure passed despite resistance and comes as European competition authorities investigate the tax affairs of Apple in Ireland and Starbucks in the Netherlands.

“We have a political deal,” said Pierre Gramegna, finance minister for Luxembourg, which holds the rotating presidency of the European Union.

“Europe is showing the way, is a pioneer and is sending a strong signal to the world in tax matters,” he told a news briefing.

Under the plan, the bloc’s 28 countries would share information about the deals agreed with some of the world’s biggest multinationals so as to help rein in tax avoidance in Europe.

The deals however would still remain out of the public eye, with the exchange of information strictly limited to tax authorities.

“We chose not to have a public transparency but to have exchange between administrations and this will be respected,” said the EU’s top economic affairs official, Commissioner Pierre Moscovici. The LuxLeaks scandal last year revealed that some of the world’s biggest companies — including Pepsi and Ikea — had reduced their tax rates to as little as one percent in secret pacts with the authorities in Luxembourg.

The revelations, unearthed by a group of investigative journalists, were a huge embarrassment to European Commission head Jean-Claude Juncker, who served almost two decades as Luxembourg prime minister.

Juncker tasked the Commission to push through the automatic exchange of tax rulings as part of the response to the scandal. But critics say that the measure would prove ineffective.

“We absolutely don’t think this will make what we saw in LuxLeaks go away,” said Tove Ryding, a tax specialist for the NGO Eurodad.

Instead, Ryding warned that EU countries will continue to compete to attract businesses and use the new information to “offer the company something even better”. The measure now goes to the European Parliament for approval.

Eva Joly, an influential Green MEP, welcomed the decision but said the tax rulings must be made public.

“Transparency is a necessary condition to end two decades of abuses,” Joly said in an email to AFP.

Luxembourg has always defended the legality of the secret tax rulings that allowed multinationals to know in advance how much they would be taxed.

The deal in Luxembourg comes after the world’s advanced economies announced Monday a long-awaited plan to close the loopholes on tax-avoiding multinationals that cost countries more than $100 billion a year.

The OECD calculates that national governments lose $100bn-240bn (89bn-210bn euros), or 4-10 per cent of global tax revenues, every year because of the tax-minimising schemes of multinationals.

Published in Dawn, October 7th, 2015

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