Revealed by the International Consortium of Investigative Journalists, the Luxembourg Leaks (sometimes shortened to LuxLeaks) refer to a list of hundreds of firms that benefited from tax rulings and subsequently schemed fiscal evasion. Shortly after, on March 18, the European commission (the executive body of the European Union) unveiled a new plan to counter fiscal evasion schemes, which virtually allowed companies and individuals to pay zero taxes.
The centerpiece of this plan is the exchange, between EU members, of information on deals made between firms and fiscal havens, i.e., countries where banking secrecy was a standard.
This new law is not an attack on tax rulings (an agreement on a deduction of taxes), since they are a perfectly legal way of attracting capital, which will be invested in new or old firms, thereby reducing unemployment and creating economic growth.
It is rather an attack on the lack of transparency that allows multinational firms, which produce and sell commodities in countries like France, Germany or England but pay their taxes in fiscal heavens like Luxembourg, Liechtenstein or Switzerland, to abuse the system and practically pay zero euros worth of taxes.
These abuses cost a shortfall for European governments of billions of euros, essential to their budget, especially now, when an economic crisis of the same as magnitude as the great depression of 1929 still affects European economies.
The law would change the European economic setting since it allows the European commission to investigate any bank account it judges fraudulent if member states fail to provide the required information at the end of each quarter. But certain groups, like the NGO “Oxfam,” criticize this law, judging it too weak and stating that it will just slow the process of fiscal evasion without stopping it.
Pierre Moscovici, the European commissioner for Economics and Financial Affairs, Taxation and Customs and the national secretary of the French Socialist Party (PS), responded to this claim, stating that a law forbidding these practices would have been impossible to agree on since the unanimity of the 28 member states (including Luxembourg) is required concerning fiscal matters.
Moscovici said he hopes that this law should be adopted by the end of the year and be effective as early as January 1, 2016.
Yet, this law will only take effect in EU countries, but fiscal havens like Switzerland, Liechtenstein, and Monaco do not fall under its jurisdiction since they are not member states, in addition to fiscal havens located in the Pacific and South-East Asia, like Macau, the British Virgin Islands, or the Cayman Islands.
Before the civil war, Lebanon was considered a fiscal haven with its many banks, banking secrecy, and interesting fiscal policies for great fortunes. But the political instability of the past 40 years drove away capital.
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