According to media reports, Luxembourg still offers too many loopholes for tax avoidance and money laundering. The government firmly rejects the allegations, and MEPs are calling for consequences.
After the renewed allegations about Luxembourg’s tax practices, MEPs have called on both the European Commission and the Federal Government to act. The CSU MEP Markus Ferber said the so-called “OpenLux” research by German and foreign media confirmed that Luxembourg remains “an inner-European tax haven”. He called on the EU Commission to “take another very close look at Luxembourg’s tax practices” and, if necessary, to initiate infringement proceedings.
“Questionable characters as company owners”
On Monday, the “Süddeutsche Zeitung” published research on companies, funds and foundations active in Luxembourg together with foreign media. Despite a transparency register introduced in 2019, the research shows that the real owners of almost half of all facilities are unknown. This opens the door to tax avoidance and money laundering, it said. Luxembourg’s government “firmly” rejected the allegations.
According to research baptized “OpenLux”, there are around 140,000 active companies, funds and foundations in Luxembourg, most of them from France, Luxembourg and Belgium. Accordingly, Germany ranks fourth with 4,638 registered facilities. The “SZ” also reports on several German celebrities such as actors and models.
In the case of the known data, information in the register introduced in 2019 is also often incorrect, according to the “SZ”, which researched with the French newspaper “Le Monde”, the “Miami Herald” and other partners. In addition, there are a number of “questionable figures as company owners”, such as an arms dealer, the leader of one of the largest Russian mafia organizations or people with connections to the Italian ‘Ndrangheta.
Luxembourg rejects allegations
Luxembourg’s government accused the authors of “making a number of unsubstantiated claims about the Luxembourg economy and the financial center”. “Luxembourg’s legislation is fully in line with all EU and international regulations,” it said. “There is no favorable tax regime in Luxembourg for multinational companies or for digital companies.” These would have to adhere to the same tax rules as Luxembourg companies.
The Luxembourg government also emphasized that it was one of the first in Europe to set up a public register of beneficial owners behind registered companies. Unlike in other EU countries, this is accessible to everyone online and free of charge. The completeness rate was around 90 percent at the end of 2020.
Luxembourg hit the headlines in 2014
Luxembourg hit the headlines at the end of 2014 for the “LuxLeaks” revelations on its tax practices. At the time, there was outrage across Europe that multinational corporations such as Ikea or Amazon in Luxembourg were able to reduce their taxes to almost zero through agreements with the tax authorities and thus avoid tax payments at the expense of other EU countries.
According to the “SZ” report, such agreements with companies for tax avoidance in the Grand Duchy fell from 599 in 2015 to only 44 last year. Nevertheless, Luxembourg remains a “tax haven”, writes the newspaper. Because every year Germany and other countries lose billions due to the practices there because money is being moved to Luxembourg.