Juncker responds to Luxleaks tax scandal

So Margrethe, about these Luxembourgian tax schemes...

European Commission President Jean-Claude Juncker has just made an impromptu appearance at the midday press briefing to make a statement and answer a few questions on the furore surrounding the leaked documents showing the significant number of favourable tax deals given to corporations by the Luxembourg government during his tenure as Prime Minister and/or Finance Minister (1989 - 2013).

Here are the key points from his response:

• The Commission has previously reviewed the tax arrangements and stated that they are in line with national and international (EU) law.
• However, due to different national rules, the interaction between EU member states can lead to non-taxation and results which are not in line with moral/ethical standards. Therefore, there is a need for greater tax harmonisation in the EU.
• The Commission is committed to fighting tax avoidance and will do so under his tenure. There is no conflict of interest since Competition Commissioner Margrethe Vestager has a significant amount of autonomy and Juncker will not discuss the Luxembourg cases with her.
• Luxembourg has always supported EU tax harmonisation. As Commission President, he will push this idea again. He will also introduce a new mechanism for automatic transparency of tax deals so each member state knows what others are doing.

Quite a staunch defence by Juncker then but needless to say many of the journalists at the briefing (not to mention his critics in the European Parliament) seemed unsatisfied. A few key issues which continue to concern us are listed below.

• This should not be an excuse to push tax harmonisation at the EU level: Tax is a national issue and should remain so. Juncker’s use of this as an excuse seems to be mostly an attempt at deflection. There are key reasons why proposals on this have never gained traction. Juncker’s insistence that Luxembourg always supported such harmonisation is also an easy defence to make to an extent, since it is clear many other members do not – as such under unanimity there was little hope of it passing. Furthermore, Luxembourg (along with Austria) was the key holdout in delaying the recent deal on tax secrecy.
• Serious questions need to be asked about the level of scrutiny applied in Juncker’s nomination process: As we have long pointed out, the Spitzenkandidaten process which lead to Juncker’s appointment is a bad idea for a number of reasons (lack of scrutiny being just one of them). Juncker gained the nomination of the European Peoples Party through the support of 382 delegates (less than half the total). In the elections only 10.2% of the potential electorate supported this party (and they only voted for national parties which are part of the EPP), while polls showed that only 8.2% were able to name Juncker as a lead candidate. Furthermore, only a third of people knew the candidate of the lead party would likely become head of the Commission. Overall, there was little scrutiny of Juncker and little discussion of his policy proposals or his past.
• In general, tax competition is a good thing and should be maintained in the EU: That said, greater transparency is also good for having good functioning markets, promoting competition and helping spread best practice. Proposals for transparency therefore can be welcomed but should also include making information public, of course taking account of companies privacy and sensitive information concerns.
• All this though should not deflect from valid questions about Juncker’s role in the numerous tax deals struck under his watch: The key questions remains to what extent he was aware that such deals were undermining the tax collection of other member states. The basic premise of Juncker’s defence, to look forward at remedies, should also not detract from necessary scrutiny of these deals and what has happened previously. 

This story has plenty of way to run yet.

Anti-austerity inside the eurozone: Greek voters stick to their potentially false choice

The key trend in Greek opinion polls holds steady: voters back anti-austerity parties in great numbers but  remain committed to staying in the euro in equally great numbers. The latest Public Issue poll released yesterday put the radical left Syriza as the largest party with 30% of the vote, New Democracy on 26% and Pasok on 15%. The figures suggest a surge in support for Syriza but also a move back towards the larger parties, with smaller parties falling in the polls.

Interestingly, a poll from Ipsos suggests that 70% of Greeks would vote to keep the euro if a referendum on the issue were held today, this compares to 50% of Italians, 62% of French, 51% of Germans and 55% of Spaniards. Interestingly, 38% of Italians would vote to leave the euro if a referendum was held today - that's quite high given the country's traditional support for the single currency.

On a less surprising note, from today's Die Welt we learn that fears over Greece leaving the euro has triggered yet more Greek tax evasion. Greek tax revenues between January and April were €500m lower than anticipated in the 2012 budget, while April’s takings fell by 13% on the previous year.

That is not a good sign.

The Real Face(s) Of Greece'sTax Evasion

A story bordering on the surreal from Greek newspaper Ta Nea yesterday. Apparently, the Greek financial police (SDOE) are investigating 77 cases of 'parsimonious' Greeks who have managed to set aside bank deposits worth a mind-boggling total of €1.9 billion, despite their individual income tax-returns not always mirroring a situation of well-being. The list includes 36 doctors and three former hospital directors.

Here are some examples - they do really speak for themselves:

• A farmer who between 2001 and 2010 declared an annual income ranging between €1,608 and €6,774 (except for 2006 and 2007, when he submitted an income higher than €74,000) made deposits amounting to €10.6 million over the same period;

• A hair-dresser only submitted a tax-return for 2009, declaring an income of €35,435, while having deposited €423,531 between 2007 and 2010;

• An astrologist did not submit any tax-returns in 2007-2009, yet made deposits worth €2.19 million over the same period;

• A doctor only submitted tax-returns in 2005 and 2006, with a total declared income for both years of €172,014, but made bank deposits amounting to €5.7 million between 2005 and 2010.
  
  

This is seriously crazy stuff, which throws up a whole range of questions. For example, what's up with Greece and hairdressers? And how much of the €10.6 million pocketed by the super-wealthy farmer actually came from EU farm subsidies?