The surprise appearance of the Commission President at today’s (12/11) Commission press conference was an object lesson in disassociation with one’s past. The performance was reprised in the European Parliament later the same day. He stated that under his watch there was nothing illegal under national or international law (no mention of EU law though) regarding the tax regimes of Luxembourg, writes chief political correspondent Tim McNamara.

He claimed that “If the tax rulings, which were legal, led to a situation of non-taxation, I regret it.” But will Juncker’s assertions stand up to scrutiny? His assertion that “everything that has been done has been in compliance with national legislation and international rules that apply in this matter”, on examination looks like a masterpiece in dissembling.

He went on to say “….nothing in my past to indicate that I wanted to encourage tax evasion”. This misses the point entirely, firstly nobody is accusing him of encouraging tax evasion. What occurred (and still occurs) in Luxembourg was a tax regime that was a key global player in tax avoidance, not evasion. Denial of something you have not been accused of is political sophistry.

Juncker also said “I have said that the Commission would fight tax evasion and fiscal fraud, I want everyone to know that those are not just words but really reflect the Commission’s aim.” Again, Juncker misses the point, the concerns about his country are not centred on fraud or evasion but on complicity in avoidance.

In his appearance before the European parliament he tried obfuscation as a tactic, blaming many member states for blocking harmonisation of corporate taxation. He went on to say that Luxembourg was not alone in having tax competition policies. “ “This is not a particular characteristic of Luxembourg, this is something we find almost everywhere in Europe”.

The revelations by the International Consortium of Investigative Journalists (ICIJ) have created a profound crisis at the highest levels of the European Commission. The danger to Juncker is a steady drip drip of revelations that may undermine his claims of plausible deniability. It seems likely that the ICIJ will have held back some documentary evidence that will be of public interest in the future, especially if it undermines Juncker’s public defence.

One parallel threat to Luxembourg’s reputation is the on-going ‘State aid’ investigation into the country’s tax management policies by the European Commission’s Directorate-General for Competition. Unfortunately, the scope for accusations of conflict of interest are undeniable.   There will need to be a series of chinese walls between the Commission’s president and the rest of the commission over this matter. The same applies to Juncker’s first vice-president Frans Timmermans, the Dutch Commissioner as the Netherlands Government is also under investigation as regards tax and related state aid

In reality, the finance ministries of the other member states were ‘looted’ by the complex deals sanctioned by the Luxembourg tax authorities. What has been revealed is ‘tax laundering’ on a massive scale.  At least 340 global companies were granted deals to help them avoid tax during his 18 years in office. The meekness of national tax authorities in taking on global multinationals is also a factor.

Companies such as Google, Amazon, E-bay etc. etc. chose Luxembourg to engineer their tax liabilities through for a reason. That reason was the complicity of the Luxembourg government in facilitating complex paper trails that had the Grand Duchy at its core.

Tools such as charging interest on loans from a Luxembourg-based subsidiary to trading arms in the rest of the world. Or charging for intellectual property rights on the branding of companies operating outside of Luxembourg. Such tax-avoiding chicanery could lead to reducing tax liabilities on the monies concerned from upwards of 20% down to 1%.

In the UK, Juncker has been the subject of a tirade from the influential parliamentarian Margaret Hodge. As chair of the House of Commons public accounts committee, she has already lambasted the chief executives of companies such as Apple and Amazon amongst a long list of others. Hodge said of Juncker “He needs to give  an explanation about what he knew. It seems inconceivable that he did not know about these tax schemes and it is outrageous that he is representing the EU at the G20 on tax evasion.”

For such a small country, with a population of just 550,000, the financial sector is of paramount importance as it accounts for the majority of economic activity. It is utterly inconceivable that strategic decisions as regards tax policies were not taken at the highest political level in the duchy. This would not just be confined to the Finance Ministry but would also have almost certainly been signed off at prime ministerial level.

The number of people concerned with direct tax policy was, and is, very small indeed. To believe that a tax regime that had profound effects on international relations with other national tax authorities and, by extension, governments did not require being signed-off by the finance minister and prime minister is simply ludicrous. It is not for nothing that companies such as Pepsico, IKEA and FedEx have made secret deals with Luxembourg.

Hodge underlines this by saying “He has got to explain himself, For a long time he was prime minister of a country that was operating as an aggressive tax haven. He has to say what he is going to do to restore his reputation and … to ensure the EU will prevent these schemes proliferating across the EU..”.

“Ultimately taxpayers from other countries foot the bill for the kind of aggressive schemes run in Luxembourg. These schemes… have been reported on repeatedly, yet he seems to have done nothing.”

Hodges accusations may be the most vehement, but it is guaranteed that Finance ministers and associated parliamentary committees across the EU are thinking on similar lines.

Jean-Claude Juncker may have a plausible explanation to counter all of the accusations being currently made against him. However, the quicker he reveals all of the facts about Luxembourg’s corporate tax policies the better for him. Taking a week to respond to the revelations of the ICIJ has not been an auspicious start.