Monthly Archives: December 2014

What I think of Luxleaks

A picture of some Euro banknotes and various Euro coins.

A picture of some Euro banknotes and various Euro coins. by Avij
Creative commons license, found on Wikipedia

TL;DR: We had it coming.

Long version: Originally I wasn’t going to say much about it, but I keep getting tagged on social media regarding this. I can understand: How many Luxembourgers do you actually know except me? Unless you live here, probably not all that many. Believe me, if something happens in the Luxleaks affair, I’ll know: Our local press won’t shut up about it. So, this post presents my opinions and thoughts about the whole thing.

General observations:

  1. Nothing of this actually surprised any citizen of my country. Well, “nothing” isn’t entirely true, but I’ll get back to that. It is fact that Luxembourg has been providing means to multinationals and big and small corporations alike to alleviate their tax levels. That this was done using “mailbox companies” was also known.
  2. Officially, “mail box companies” are sternly frowned upon. The idea was that, attracting companies to Luxembourg, would create employment. Yes, a local a secretary and local manager is two jobs more than the zero jobs that mailbox company would provide. Apparently, this was only an official stance, and did not match the reality.
  3. The existence of the so called “tax rulings” was known, even though I doubt by the general public. I most certainly never heard of it in that form, but the accountants I talked to, said they knew. Anecdote, of course.

Taxes for citizens and small businesses:

  1. Let me make this clear: we citizens of Luxembourg do pay income taxes and a plethora of other taxes. Yes, is true that we have a rather low income tax compared to other countries. As someone who is rather well-off, I (actually we: income of spouses are cumulated) end up in the second-highest tax level. There is very little I can do about that, except a few minor incentives to save for retirement or a home. The latter being totally ridiculous, as the amounts required to buy any property are so high that those saving incentives are pretty much a drop on a hot plaque.
  2. Small businesses have a bit more leeway as businesses do have more options to do tax write-offs. Nevertheless, the small business like the one of my father in law, have to pay the official taxes. There is no special ruling for them. The bakery at the corner, the plumber, the florist, they all pay the 29% corporate tax.

With this out of the way, let me state this: I was convinced that having multinationals here in Luxembourg was a good thing. I naively assumed they would indeed create employment, and while Luxembourg isn’t cheap, the lesser tax rate -I repeat: 29%-, would be enough incentive to bring business here. I thought: this is good for the country, corporations help fund the rather nice living standard we have.

However, that is not what is happening. What is happening, is that multinationals don’t pay fair taxes. As a matter of fact, some multinational companies pay less tax than me and my spouse. Other multinationals pay taxes with which you can barely buy a mid-class family car.  That is what surprised me.  That is not good for my country. We stand here as the crooks that allowed a crime, with barely any rewards. Barely any employment creation, no significant taxes paid to our countries coffers and a huge scratch in our international image. With the best of will, I cannot see how any government official would call this “positive” for our country.

In all honesty, I can not fathom why nobody is on the streets and asking for the heads of the officials that let this go through.  I can’t understand why mobs aren’t storming the headquarters of big consulting companies and lynching the suits responsible for this.
Well, yes, I can: I wouldn’t do much in the first place.

As for Antoine Deltour, the person who is accused of leaking the documents.  I personally think we can thank him.  Thank him for making public with what abject methods consulting companies work, thank him for showing the lack of transparency the Luxembourgian tax system has and thank him for trying to make this world a bit more fair.
He’ll probably be the scapegoat for the whole thing.  He’ll pay a much larger price than the thinks, literally becoming unemployable.

We all are the losers in this game, except the big multinationals, consulting companies and their respective shareholders.

Of course, it’s all legal and our elected government allowed it. We dealt with the devil and lost. We had it coming.