The European Commission has started legal action against Portugal for its failure to take on board key European Union legislation on the exchange of information concering tax deals granted to multinationals operating in Europe.
After the LuxLeaks* scandal in 2014, the Commissions set in motion laws that needed to be adopted by each European member country by the end of 2016. Portugal, Cyprus and Bulgaria failed to hit the deadline.
The LuxLeaks papers exposed the covert deals that Luxembourg had signed with multinationals such as Amazon that had enabled tax avoidance, verging on tax evasion, and that had disenfranchised the countries where the business traded by offering a minimal-tax shelter for corporate profits.
These secret deals were signed while Jean-Claude Juncker was the prime minister of Luxembourg between 1995 and 2013, after which he became President of the European Commission which now is working to unravel the very 'Luxemboug model' of highly preferential tax deals that he had overseen.
"The new rules are designed to clamp down on cross-border tax avoidance, aggressive tax planning and harmful tax competition,” according to a Commission statement on July 13, 2017 while advising the media of the legal action now stating against the three countries.
Portugal’s government has two months in which to explain to the Commission why it has not bothered to hit the deadline.
The next step is for Portugal, assuming it continues to avoid passing the legislation into national law, to be hauled before the European Court of Justice.
The Bulgarians have a reasonable excuse in that their government resigned at the start of the year, pushing back the legislation which now is being worked on.
Cyprus and Portugal have offered no excuse while work continues in Brussels to determine whether hundreds of tax deals struck between EU member governments and multinationals are in violation of rules concerning government aid to selected classes of taxpayer.
Ireland already has been at the receiving end of the European Commission’s ire. Its government was forced to send Apple Inc. a demand for $14.5 billion in back-taxes.
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* Luxembourg Leaks (shortened to LuxLeaks) is the name of a financial scandal revealed in November 2014 by a journalistic investigation conducted by the International Consortium of Investigative Journalists. It is based on confidential information about Luxembourg’s tax rulings set up by PricewaterhouseCoopers from 2002 to 2010 to the benefits of its clients.
This investigation resulted in making available to the public tax rulings for over three hundred multinational companies based in Luxembourg.
The LuxLeaks' disclosures attracted international attention and comment about tax avoidance schemes in Luxembourg and elsewhere. This scandal contributed to the implementation of measures aiming at reducing tax dumping and regulating tax avoidance schemes beneficial to multinational companies.
The judicial aspects of this case concern the persons charged by Luxembourg justice for participating in the revelations. No multinational company was charged. The LuxLeaks trial took place in spring 2016 and led to the condemnation of the two whistleblowers.
