Jean-Claude Juncker's real scandal is his tax-haven homeland of Luxembourg
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Version 0 of 1. Comrades! Allow me to introduce to you the Progressive Alliance of Socialists and Democrats at the European parliament's favoured candidate in this week's election for the next president of the European Commission. Fraternal greetings please for Mr Jean-Claude Juncker. I admit that Jean-Claude does not appear at first glance to be the man most likely to promote the European socialists' goal of "ensuring that our societies become fairer". Nor at a second, third or fourth glance either. Juncker has dedicated his career to ensuring that society becomes less fair; that wealthy institutions and individuals can avoid the taxes little people and small businesses must pay. "Everywhere do I perceive a certain conspiracy of rich men seeking their own advantage," wrote Sir Thomas More in 1516. He might have been describing Mr Juncker. The Grand Duchy of Luxembourg's Ruritanian title carries a whiff of archaic glamour. But it is nothing more than a piratical state. The only difference between pirates old and new is that instead of using muskets and cannons to seize other people's money, Luxembourg uses accountants. We don't see it because the EU turns the British upside down. Conservatives deplore Europe because it threatens national sovereignty, even though the euro is bringing cuts to welfare states and wages conservatives approve of in other circumstances. The liberal-left thinks of itself as internationalist and therefore bites its tongue and mumbles its words when the EU promotes policies it would condemn if they came from Westminster. Please put your prejudices aside, if you can, and concentrate instead on why Luxembourg matters. What heavy industry the duchy had was vanishing by the early 1990s. During Juncker's reign as Luxembourg's prime minister from 1995 to 2013, the duchy reinvented itself as Europe's largest tax haven: a land fit for Bernie Madoff to trade through. It allowed conglomerates to avoid tax through intermediate holding companies solely. BBC's Panorama uncovered documents that neatly illustrated how the companies redistribute wealth. The UK headquarters of GlaxoSmithKline established a Luxembourg branch in 2009. The subsidiary lent £6.34bn to GSK in the UK. The UK company paid nearly £124m in interest back to the Luxembourg subsidiary. The revenue could not tax the interest at the then UK level of 28% and collect £34m. Instead, the Luxembourg tax authorities levied a tax of 0.5%, or £300,000. The deal was pin money by Luxembourg's standards. Virtually every large British company has moved capital through Luxembourg including, it appears, my managers here at the Guardian and Observer, though they say such a structure was not about saving the group "any UK corporation tax when compared with an onshore structure". The revenue endured the greatest scandal in its history when it allowed Vodafone to pay just £1.25bn of an alleged £6bn tax bill from a takeover organised in Luxembourg. The Financial Times estimates that Luxembourg's financial sector has grown from virtually nothing in the 1980s to €3tn today. Richard Brooks, the author of The Great Tax Robbery, tells me Luxembourg is a far greater menace than the Caribbean laundromats. It benefits from the European Union's free movement of capital, while the Cayman Islands, say, cannot. More dangerously, it inspires the Netherlands, Ireland and other EU states following beggar-thy-neighbour tax policies to join it in a race to the bottom. If your services are being cut or taxes are going up, if you run a small business that cannot compete with Amazon or another large entity, the odds are that Jean-Claude Juncker's Luxembourg has made your life harder. The basic standards of honest government ought to disbar him from the presidency. The European Commission he presumes to lead is investigating the Luxembourg he created. It wants to know how Amazon could put £11bn through its Luxembourg-based subsidiary in 2013, while paying only £4m in UK corporation tax on goods sold to British customers, packaged in British warehouses and moved on British roads. Ireland and the Netherlands are co-operating with the inquiry into illicit tax advantages. Luxembourg, however, has compelled the commission to go to court to secure the relevant documents. Juncker is asking to be put in charge of a European Commission that is engaged in legal action against his tax regime. He will be supervising an investigation into deals he insisted as prime minister of Luxembourg should remain hidden. I do not see how he can be trusted with such power, not least because the EU's lax rules place no obligation on Juncker to declare a conflict of interest. And this is the man Europe's "progressives" want to make president of a continent. François Hollande and other socialist and social democrat leaders endorsed Juncker at a meeting in Paris last month. They, and Europe's green leaders too, believe that the centre-right "won" the last European elections. The rest of us could not help but notice the success of racists and know-nothing nationalists. Our progressive leaders disagree. To their mind, Juncker triumphed and must be rewarded. Their support comes at a price, of course. The socialists expect Juncker to cuts deals and scratch backs: promote a German social democrat here and an Italian feminist there. I am pleased to say that the British Labour party is upholding the honour of the European left. Its 20 members of the European parliament will not vote for a candidate who believes in austerity for the many and tax breaks for the few, whatever payoffs he promises. They believe socialists and greens from other countries will ignore their leaders and deny Juncker victory in this week's secret ballot. I hope for the sake of the centre-left they are right. Commentators have been saying the left is in crisis for so long it is easy to dismiss them with a shrug and a yawn. But the success of the far right cannot be breezily ignored. It tells working-class voters that conventional politicians are all the same. The choices they pretend to offer are a fraud. While the elite prattles about its principles in public, it rigs the system in private. The worst damage Europe's socialists will inflict when they endorse a man who has done as much harm as any politician his generation is easy to describe. They will prove the extremists right. |