The European Commission intends to analyze leaked Luxembourg private tax rulings for evidence of illegal state aid, the European Union’s new competition chief, Margrethe Vestager, said November 20.
“We consider the Lux-Leaks documents as market information. We will examine [them] and also therefore evaluate whether or not this will lead us to open new cases,” Vestager said at a press briefing.
The leaked documents — confidential PwC client documents, including 548 Luxembourg advance rulings and corporate tax returns of Luxembourg-based subsidiaries of MNEs — were published on the internet on November 5 by the International Consortium of Investigative Journalists (ICIJ). The tax documents were accompanied by a series of news stories that conclude that Luxembourg has been long time partner in MNE tax avoidance.
Vestager said that in her view, the tax rulings can be used legally in an EU state aid investigation. “We can use it and we consider it legitimate to do so,” she maintained.
The leaked documents only provide “one side of the story,” so the Commission will request that Luxembourg provide it with more information, Vestager said. If Luxembourg does not cooperate, and the rulings are incompatible state aid, the Commission will move forward anyway, she said.
Vestager noted that Luxembourg has still not responded to a Commission request to provide a list of companies that have received Luxembourg private tax rulings. She said she hoped that the information will now be released, given the momentum toward more tax transparency and the new push for automatic exchange of tax rulings.
“I sense we can have a good working relationship with Luxembourg going forward,” she said.
Before analyzing the Lux Leaks rulings, Vestager said the Commission intends to first complete its investigation into whether tax rulings granted to Amazon and Fiat in Luxembourg, to Apple in Ireland, and to Starbucks in the Netherlands constitute state aid. That work will hopefully be complete by the second quarter of 2015, she said.
She mentioned that the Commission has also investigated rulings practices of Belgium, the UK, and other EU nations. The Commission operates in a “structured way,” Vestager said. Rather than asking for information on all private rulings from all states, which would result in a “tsunami of paper,” the Commission works where it believes there may be a problem. It asks EU states to disclose which companies have received rulings to see if a certain pattern emerges in the ways that tax rulings have been used, she said.
Vestager also said that she does “admire the journalistic work” of the ICIJ. “I think it is very important, and has added on to transparency, and is changing the debate in Europe,” she said.
She said she hoped the uproar over the Luxembourg private rulings would lead to tax reform in Europe, such as adoption of the common consolidated corporate tax base, information exchange, and enhanced transparency for private tax rulings.
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