Luxembourg named in new tax haven investigation
(The 10th paragraph of this story was corrected to say that the organisation responsible for the OpenLux investigation was the Organized Crime and Corruption Reporting Project (OCCRP), not the ICIJ)
Luxembourg's fight to shake off its reputation as a tax haven was facing a new challenge this weekend after it featured in a new media disclosures showing the off-shore secrets of wealthy corporations, world leaders and billionaires.
The Grand Duchy played no central role in the so-called "Pandora Papers", according to the Reporter website, which had exclusive access to the documents. But with some 100,000 of the investigation's 11.9 million documents mentioning Luxembourg, according Reporter, the scope for new revelations when the journalistic consortium publishes the documents is material.
The investigtation by the International Consortium of Investigative Journalists (ICIJ) showed that Luxembourg was still being used as a middle man in diverting money to offshore tax havens, despite a 2021 law that sought to make the practice harder, according to Reporter.
Think tanks and activists in recent years have repeatedly claimed that Luxembourg is a magnet for those wishing to avoid tax and hide money. Only a month ago, a study by the EU Tax Observatory found the Grand Duchy is one of the world's most profitable tax havens. The country has been cleaning up its act ever since the so-called ‘LuxLeaks’ scandal in 2014 showed that global corporate giants received sweetheart tax deals from Luxembourg under former Prime Minister Jean-Claude Junker.
People mentioned in the new investigations this weekend are - amongst others - Czech Prime Minister Andrej Babiš, Jordan King Abdullah II and Azerbaijan’s ruling Aliyev family. The investigation did not necessarily accuse mentioned individuals of any crimes, the ICIJ said.
Altogether the documents mention more than "330 politicians and 130 Forbes billionaires, as well as celebrities, fraudsters, drug dealers, royal family members and leaders of religious groups around the world", the ICIJ said.
The findings are based on leaks of 11.9 million documents, the ICIJ said. The group did not disclose the exact source of the leaks but said that they came from "14 offshore service providers that give professional services to wealthy individuals and corporations seeking to incorporate shell companies, trusts, foundations and other entities in low- or no-tax jurisdictions".
A rich history
In 2016, the ICIJ broke the "Panama Papers" scandal which showed how global corporations and rich people used the Panamanian law firm of Jürgen Mossack and Ramon Fonseca to divert profits and avoid tax, an investigation that also had ramifications in Luxembourg, where it is still being investigated.
The publication of the Panama Papers prompted the resignation of Icelandic Prime Minister Sigmundur David Gunnlaugsson and of Pakistani Prime Minister Nawaz Sharif, who were both mentioned in the files.
In February, a different organisation, the Organized Crime and Corruption Reporting Project (OCCRP) highlighted how Russian mafia bosses and those with ties to Italian organised crime gangs are among those hiding money in the Grand Duchy, in an investigations known as OpenLux.
In 2019, the EU parliament voted in favour of declaring Luxembourg, Malta, the Republic of Ireland and four other member states tax havens after a report from the parliament's special tax committee concluded that the seven members "display[ed] traits of a tax haven and facilitate aggressive tax planning".
The Parliament has no say over the EU's official tax haven black list. But Gabriel Zucman, the French economist who became the first head of the newly founded EU-funded European Tax Observatory this year, had earlier raised the prospect of excluding Luxembourg from the EU over its lax tax policies.
Finance Minister Pierre Gramegna responded after the OpenLux investigation came out by saying that criticism of the Grand Duchy was born out of jealousy. “Our financial sector is successful, also after Brexit, and people think we have cheated because we are so successful", he said in a speech.