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Gramegna defends tax letters targeting undeclared foreign income

Gramegna defends tax letters targeting undeclared foreign income

by John MONAGHAN 2 min. 07.09.2021
Finance Minister insists practice is based on "concrete" data, despite Luxembourg struggling with its own reputation as a tax haven
Finance Minister Pierre Gramegna said the practice is entirely legitimate as part of tax investigation procedures
Finance Minister Pierre Gramegna said the practice is entirely legitimate as part of tax investigation procedures
Photo credit: Guy Jallay

Luxembourg’s tax authority is acting well within its rights when it sends letters to residents stating that it suspects they have potential undeclared foreign income, Finance Minister Pierre Gramegna has said, despite the country struggling to shake off its own reputation as a tax haven.

Such correspondence, issued by the country’s Inland Revenue, L'Administration des contributions directes (ACD), is entirely legitimate as “part of the tax investigation procedure”, Gramegna said on Tuesday in response to a written parliamentary question from Social Democrats (CSV) deputy Gilles Roth.

Roth questioned whether there is a legal basis for the letters and whether they should be considered appropriate, saying that they contain a direct accusation that people are not declaring foreign income.

“The content of (the letters) can be summarised as follows: I have received information that you are in possession of income and/or a wealth sourced from abroad… these details do not appear in your tax returns,” Roth said.

“Does the Minister not consider that in the absence of more precise details, the letters can be classified as "phishing mails"? In other words, shouldn't ACD provide resident taxpayers with more precise details relating to the origin of the information?,” added the CSV deputy.

Gramegna defended the use of the letters, describing them as “in no way…phishing emails (or) phishing expeditions” but saying such correspondence is based “on concrete, relevant data previously communicated to the ACD by automatic exchange of information (between tax authorities)”.

In many cases, people will be exempt from paying double taxation in any event due to bilateral treaties in force between Luxembourg and numerous other countries.

Gramegna added that it is to be “legitimately expected” that people registered as tax residents in the Grand Duchy co-operate fully with the ACD and “produce all the information at their disposal in relation to their wealth abroad which is likely to generate income”.

Luxembourg’s official pursuit of residents with foreign income stands in contrast to its reputation as a safe haven for tax avoiders, following successive reports that the country gives preferential treatment to some companies, thus depriving other nations of tax revenue.    

The Grand Duchy is one of the world's most profitable tax havens, a study by an EU-funded research group found this month.

The so-called ‘LuxLeaks’ disclosures in 2014 showed that global corporate giants received sweetheart tax deals from Luxembourg under former Prime Minister Jean-Claude Junker's government, costing foreign taxpayers billions in revenue.

In February, a global journalism consortium's investigation highlighted how Russian mafia bosses and those with ties to Italian organised crime gangs are among those hiding money in Luxembourg. On that occasion, Gramegna responded by claiming that criticism of the country was borne out of jealousy.

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