Luxembourg’s tax evasion, tax avoidance, tax optimization, tax minimization, tax rulings history.

My Ochids. Phalaneopsis "Tax Joy". Photo ET

Luxembourg’s tax evasion, tax avoidance, tax optimization, tax minimization, tax rulings history.

Luxembourg in legalistic terms will no longer be a tax evasion center in a couple of years. Which practically means that the announced death of such a haven puts it out of business the day you announce its death. The Mom and Pop tax evasion, the elderly couple and the Belgian dentist driving into Luxembourg with a bag of cash is over. From time to time you just hear the sad story of the elderly couple trying to repatriate their undeclared cash by hiding it in their underwear, well knowing that the tax evasion loophole closed on them, and that the customs agents are vigilant. Those who make it home safely with their cash are lucky, those who run into a customs control at least had hope until the trap closed, but they’ll survive and keep some of the cash after fines. Victims of the unscrupulous players like those clients of Landsbanki and Madoff unfortunately can save the trip. There is nothing to take home. That is a summary of the sad fallout of those tax schemes.

These days as the story goes, Luxembourg’s efforts to shed the stigma of the tax haven are defeated by yet another tax haven bis, the one of the financial engineering, the Double Irish, the Dutch Sandwich and mostly the Luxembourg Tax Rulings. Luxembourg’s position on tax rulings can be explained as being perfectly legal, at least considering the variations in constructions that typically are used. Even other countries do it, but those are only amateurs. And though the tax ruling practice can be explained legally, no one is willing to buy the schemes. They just look too unfair to the public, and you cannot win that argument. President Obama, who has still high standing in Europe, likes to light a fire under Ugland House, a building in the Caymans where 18,000 companies are domiciled for tax evasion/avoidance/optimization. Though many countries use all kinds of tax incentives, these practices, concentrated in their vast numbers in a few jurisdictions cannot survive without severe changes, which will be imposed through OECD agreements: here comes BEPS, Base Erosion and Profit Shifting. The name says it all. It will be the end of corporate tax strategies and the end of gaps and international loopholes.

Though warning signs were plenty, Luxembourg did not prepare for those inevitable changes. A negligence given that close to 40% of the State budget is generated by its financial center. A negligence also given the present storm around this issue and the new President of the European Commission for whom "the chickens come home to roost", as in this NYT article: 

Jean-Claude Juncker, Top E.U. Official, Faces Rising Furor Over Luxembourg Tax Revelations