Leak shows scale of Luxembourg’s sweet tax deals

Luxembourg, one of the world’s wealthiest nations, came under fire Thursday after leaked documents allegedly revealed the extent to which it has attracted multinationals and the super-rich with sweet tax deals, depriving other countries of valuable tax revenue.

The government defended itself, saying it had done nothing illegal in its deals with corporations such as PepsiCo and Ikea. But other European nations, including neighbor France, criticized the tiny country’s tax practices — particularly when they have to impose austerity cuts on their citizens to make ends meet.

“Tax ‘optimization’ — companies that legally find solutions to pay little or no taxes — that is no longer acceptable for any country,” said French Finance Minister Michel Sapin. “I wish that in a few years we never have to talk about something like this again.”

Luxembourg’s other neighbors, Belgium and Germany, and the Netherlands were equally quick to condemn the practice, which gained center stage Thursday when a group of investigative reporters produced documents allegedly showing that scores of major multinational companies have won such advantageous deals. The deals occurred during the tenure of new European Commission President Jean-Claude Juncker.

The practice can include offering low corporate tax rates to companies that have their European Union headquarters in Luxembourg, a nation of 520,000 that otherwise doesn’t have a big economy.

But Luxembourg is not alone in being aggressively competitive in attracting companies. Ireland and the Netherlands itself are being investigated by the European Union executive for their tax practices. The issue has come to the fore since the financial crisis saw governments scrounge for money to refill their coffers — and tolerance for such practices waned.

. “What has happened here is totally legal,” he said.

He said Luxembourg would cooperate with others to make sure tax standards are better coordinated on a global level as soon as possible. “The moment the rules change globally, it is evident that Luxembourg will apply them quickly,” Gramegna said.

The International Consortium of Investigative Journalists said the practice in Luxembourg was widespread after it pored through some 28,000 pages of confidential documents covering some 340 businesses that could be linked to the grand duchy for special tax deals.