Commission says Luxembourg free to offer investment incentives

The European Commission has said that its Competition division will continue to investigate breaches of state aid rules, but stressed that countries, including Luxembourg, are free to offer incentives to attract investment.

Reacting to the revelation overnight that Luxembourg has offered tax rulings to hundreds of companies while the new European Commission president Jean-Claude Juncker was Prime Minister of Luxembourg, a Commission spokesman said that the tax rulings offered by Luxembourg were “typical” of the schemes offered by member states.

Mr Juncker had taken a “serene” attitude to the reports, his spokesman said this morning. In a statement, the European People’s Party (EPP) of which Mr Juncker is a member appeared to back Mr Juncker, claiming that the controversy was “not a personal issue” for the former Luxembourg prime minister.

Mr Juncker, who began his five-year term at the helm of the European Commission just this week, was prime minister of Luxembourg for 18 years, including the period during which the tax deals uncovered by the ICIJ investigation revealed overnight were arranged. On Wednesday, in response to a question about the Commission's ongoing investigation into Luxembourg's tax arrangements with Fiat and Amazon, Mr Juncker said he would not "stand in the way" of Commission investigations. "The Commission was and is entitled to launch these types of investigation. The Commission will do its work. I will not get involved in it," the new European Commission president said yesterday.

Today, the European Commission refused to confirm whether it would now open an investigation into the tax rulings offered by Luxembourg to more than 340 companies as revealed in more than 28,000 pages of documentation disclosed by the ICIJ and reported in The Irish Times.

Responsibility for EU state-aid investigations has passed to the incoming Danish Commissioner Margrethe Vestager, who was appointed by Mr Juncker as Competition Commissioner. In June the Commission announced investigations into Ireland, the Netherlands and Luxembourg for tax deals offered to Apple, Starbucks and Fiat respectively, with a further investigation into Luxembourg's tax arrangements with Amazon announced last month.

Meanwhile Luxembourg's Prime Minister Xavier Bettel said today that his country was abiding by international tax rules. In a short press conference this morning, Mr Bettel said that Luxembourg was not breaking any rules, and was not the only country to use tax arrangements for large companies.

This morning, members of the European Parliament responded to the revelation of the tax practices of Luxembourg. Sven Giegold the finance spokesman of the Green group, said the revelations were a "major blow to the credibility of new commission president Juncker." "The fact that EU commission president Juncker served as Luxembourg's finance and prime minister throughout this period makes him directly complicit in this mass corporate tax avoidance, " he said, adding that Ireland was one of the countries "complicit" in tax dumping.

The centre-left Socialists and Democrats (S&D) group, who backed Mr Juncker’s nomination as Commission president, called on the Commission to appear before the European Parliament next week, noting that “ the credibility of Jean-Claude Juncker is on the line.”

However, Manfred Weber, the head of the centre-right European People's Party (EPP) of which Jean-Claude Juncker is a member, said that the issue was "not a personal issue for the European Commission president." Rather it was "a question to be handled by the competent European and national authorities," he said.