Survival of the Richest

Luxembourg
One Luxembourg newspaper notes that: ‘Pending the
transposition of the [Anti-Money Laundering] directive
(by June 2017), the patrimonial foundation will remain
in hibernation. In the current context, Bill 6595 has been
transformed into a "reputational risk". Luxembourg knows it
is under close observation’. 554
Taxation
Tax treaties
Luxembourg mainly uses the OECD model, but there
are also double tax treaties that include elements of the
UN Model. Luxembourg has recently concluded double
tax treaties that contain specific anti-abuse clauses. In
principle, the Luxembourg Ministry of Finance negotiates
double tax treaties in collaboration with the Luxembourg
tax authorities, without involvement of other stakeholders.
There are no plans to carry out a spillover analysis. 555
At the moment, Luxembourg has 26 tax treaties with
developing countries, which is below average among
the countries covered in this report. The average rate of
reduction of developing country tax rates within those
treaties – 2.6 percentage points – is also significantly
below average (3.8 percentage points), and thus also less
harmful. 556 Luxembourg does not have any tax treaties that
stand out as ‘very restrictive’. 557
Harmful tax practices
In the study on aggressive tax planning structures
commissioned by the European Commission, Luxembourg is
found to have a total of 13 indicators which is above the 10.6
EU average. The only active indicator is the patent box. 558
This patent box has, however, now been closed down, albeit
with an agreement that multinational corporations that were
already using the Luxembourg patent box can continue doing
so until 2021. 559 The government has also announced that a
new system will be introduced to replace the old one. 560
After the LuxLeaks scandal and several state aid cases, one
might have expected that the number of advance pricing
agreements (or ‘sweetheart deals’) with multinational
corporations would stop escalating in Luxembourg.
However, data from the European Commission shows that
on the contrary, the number of advance pricing agreements
skyrocketed. 561 From 199 advance pricing agreements by
the end of 2013, and 347 at the end of 2014, the number of
deals reached 519 by the end of 2015. In other words, after
the LuxLeaks scandal, the number of sweetheart deals in
Luxembourg increased by 50 per cent.
As of 1 January 2015, Luxembourg has introduced a special
procedure for advance pricing agreements. This includes
a requirement that any request for such agreements be
made through an Advance Rulings Board (Commission
des décisions anticipées (CDA)) established within the tax
administration. The aim is to ensure a uniform application
of the law and compliance with the principle of equality of
taxpayers before the tax law. The new procedure has slowed
down the decision-making procedure, 562 but as noted earlier,
the number of agreements still keep increasing rapidly.
In May 2016, Luxembourg was accused by the Belgian
media of offering “oral tax rulings” in order to circumvent
the new EU legislation that obliges Member States to
exchange information on tax rulings with tax authorities
in other Member States. 563 The accusations also led to a
parliamentary question in the European Parliament, asking
whether the European Commission will open an inquiry into
the matter. 564 The Luxembourg finance minister has denied
all allegations. 565
Global Tax Body
Having previously been against the establishment of an
intergovernmental tax body under the UN, the Luxembourg
government states it is “currently undecided” regarding
the issue. 566
Conclusion
In spite of the LuxLeaks scandal, Luxembourg has continued
to issue a very high number of advance pricing agreements
(or ‘sweetheart deals’) to multinational corporations - with a
50 per cent increase during the year following the scandal.
This, as well as the fact that Luxembourg generally has a
significant amount of indicators of aggressive tax planning,
is highly concerning.
Also, on the issue of financial secrecy, Luxembourg remains
a high concern – currently placed as number 6 at the list of
the world’s most secretive countries.
Luxembourg’s tax treaties with developing countries,
although not unproblematic, are less of a concern than
many other countries covered by this report. Luxembourg’s
amount of treaties with developing countries, as well as the
average reduction of tax rates in developing countries, are
both significantly below average.
Survival of the Richest • 79