Lux Leaks II

My Orchids. Dendrobium "Transparency". Photo ET

Lux Leaks II

A promise is a promise. There is a Lux Leaks II, but of course. This one is special in many ways:

1. It destroys the perception that tax rulings in Luxembourg are over-generous.
2. It also shows that there must be a serious problem of discrimination, if not corruption, as the rulings in this case were not favorable, but rather quite harsh!
3. It is indeed my own application for a ruling to not pay taxes on moneys stolen from me. My quest for a favorable tax ruling was roundly rejected, but have a look at the background. I leak some of the essential documents hereafter. Though they are in French.

I need to pay Euros 7516.70 in arrears,
taxes on moneys stolen from me

The third paragraph explains why I can't win:
he doesn't care about the substance,
and  seeing who I was, I didn't make it into his circle of friends

The director signs with a smiley

The story:

In 2002-03 I was associated in business with other individuals in Luxembourg, but I reside in the US. As some associates left, I did too by the end of 2003, as things were not transparent. More than a year later, I was actually led to file criminal charges for embezzlement and misappropriation of corporate assets.

In 2007 the Tax Administration claimed tax arrears, on revenue I never saw, I never knew of, and that obviously was misappropriated by the former partners. As being forced to pay taxes on stolen money does not sound right, I was advised by the Tax agent to apply for a “RULING”! It is in this case called “une demande gracieuse”. It is available in cases of hardship and obvious unfairness.

My Ruling

I diligently applied, about 50 pages of documents in support of the hardship. It took about 5 months to get an answer, from a guy named Guy Heintz, the boss of the organization. Not by Marius or a similar  level of employee. My application to avoid taxation on moneys stolen from me, with criminal proceedings still going on against the perpetrators, was roundly rejected with the argument that “a remission is only possible if, objectively according to the matter under consideration, or subjectively in the person of the taxpayer, the collection of the tax appears to constitute a hardship incompatible with the principle of equity”. So Guy Heintz’s conclusion was that a tax levied on revenue stolen from the taxpayer before the taxpayer even knew of it is objectively is OK. He also has the right to discriminate personally, “subjectively”, depending on who the taxpayer is. Even a recourse to the Luxembourg Ombudsman could not sway his decision. I have to conclude that this was a vengeful malicious decision aimed at my person. I ended up paying more tax on zero revenue than the high net worth individuals and the international corporations catered by PwC, Marius, and Guy Heintz’s operation in general. As an insider of Luxembourg institutions, including 5 Ministries, I know exactly that these types of administrative “flexibility” can play both ways. It is the typical Luxembourg corruption, a corruption through influence. But you can lose and get lynched when you are on the wrong side of the equation. Corruption through influence doesn’t show up on Transparency International’s radar.

I still wait for the end of the criminal case that I filed more than 10 years ago. Though there is a final judgment on the substance: the two accused were found guilty on several counts and sentenced to 1 and 2 years in jail, but on probation, given the excessive but typical delays in the Luxembourg judiciary haven. They also have to return the misappropriated funds, estimated at 950,000 euros. Though yet another delay is going on: the convicted cannot return the moneys, because the sentencing language is not clear, according to them! However now I may be able to sue them in civil court, and hope for a conclusion in several years maybe. Madoff and Landsbanki victims, please make a note of this. You are not yet even halfway through.

Please find here the narrative of the criminal case, as reported by PaperJam:

Grande vie et business parallèle

Le «médecin de la finance» suspendu pour un an

Democracy in Europe is Really a Party

My Orchids. Phalaneopsis "Tax Rulings". Photo ET

Democracy in Europe is Really a Party

Several decades ago Henry Kissinger asked this illuminating question: “Who do I call if I want to talk to Europe?” The Treaty of Rome signed on March 25, 1957 by Belgium, Germany, France, Italy, Luxembourg, and the Netherlands, was “to lay the foundations of an ever-closer union among the peoples of Europe”. After almost 60 years of integrative wandering towards that union, another US diplomat, Victoria Nuland, Assistant Secretary of State for European and Eurasian Affairs, summarized in a 2013 leaked phone call the European Union’s international irrelevance with a resounding four letter word. I tend to agree on the substance with Ms. Nuland’s evaluation of the EU’s geostrategic relevance.

However things did get accomplished over the past six decades. Most visible is the Union’s geographic expansion, the EU growing from six to twenty-eight members. Remarkably, there seems to be no master plan. A nascent Constitution, elaborated by a “European Convention” under the leadership of former French President Valéry Giscard d’Estaing was roundly defeated by the French and Dutch voters in 2005. Instead, by 2007 a reform of the existing old treaties was adopted, a sort of Ersatz Constitution without some of the key provisions of the initial project.

The main uncertainty ever since the signing of the Treaty of Rome has been: what is the ultimate goal of the ever closer union? According to the newly minted President of the European Commission, my fellow Luxembourger Jean-Claude Juncker, “we don’t want to become the United States of Europe”. Children would never say what they don’t want to be when they grow up. They spell out what it is. And Europe is what it is, a work in progress, on organic growth guided by mutation, and happenstance, without a blue print. Unless the US model is the stealth blueprint for the EU’s free flow of people, goods, capital and services.

Having failed to deliver a plan for the future, the impatient among us might want to consider a shortcut. Why not just copy the US Constitution? It has all the ingredients of a good fundamental law. It has been debated intelligently in the “Federalist” papers, it is rooted in “We the People”, and it has proven to be a valid set of principles for the world, defining how people can live together. In order to make my point, let’s have a demonstration ad absurdum. Imagine that for a moment the US Constitution is replaced by the present European mode of operation.

First, the US would not have wanted to become the USA. It would be a union of 50 sovereign States. Each State would have instead of a Governor either a King or a Queen without power, or a President with wide power or no power. But let’s simplify and assume the 50 Governors wield the power, and meet in a (European style) Council, the supreme decision making body, which has an unelected President, who has no real power beyond arranging for cars and catering, and printing the agenda.

The 50 Governors would speak in about 45 different languages, and would need at least 2,000 translators.  Thirty States would have adopted the dollar, the others would have opted out or been prevented from joining the dollar for economic reasons. That leaves 20 States using pounds, crowns or francs. Persons could travel freely between 43 States, the 7 remaining ones would have border controls. In summary, when traveling from NY to CT you might pass a border control, change currency and learn another language!

As there would be no USA, there would be no US Armed Forces, no projection of power abroad, no federal taxes, though a hefty contribution by the States to the Union’s budget. There would be a unicameral Congress, the House of Representatives with a subordinate role to the Council of Governors. Wyoming would have 6 seats in the House instead of 1 now, and California 38 instead of 53 now. The Senate would not exist. Sales taxes would range from 15% to 33%. These for Americans shocking realities are daily life in the EU. The lack of political will and vision translates into a lack of checks and balances, and a tremendous loss of opportunity for Europeans.

In that atmosphere of expediency Jean-Claude Juncker has been selected / chosen / coopted, and some say elected President of the European Commission, the Union’s non-elected government. He had been Prime Minister of Luxembourg for 18 years, moonlighting for about 8 years in a parallel job as President of the Euro Group, the 17 member states using the Euro. In 2013 a triplet of scandals in Luxembourg brought him down. He was then designated by his peers of the European People’s Party to be their top candidate in the elections for the European Parliament of May 2014. However he was not a candidate on the electoral lists, a baffling innovation in the democratic process. But he claimed victory as he had been anointed the incarnation of the strongest party. He is thus the first political avatar winning an election without being a candidate, and to be the chosen one to the European Commission’s Presidency.

He still got the European Council’s nod, and a confirmation vote from the European Parliament. Several forces had opposed him, most prominently British Prime Minister David Cameron. Jeroen Dijsselbloem, Juncker’s successor at the Euro Group said on Dutch Television that “Jean-Claude Juncker was an inveterate smoker, and drinker”. More politically problematic was his public consecration of lying as a policy tool. When caught lying in 2005, he declared that: “When it becomes serious, you have to lie.”

Not transparent either were Luxembourg’s tax rulings when Mr. Juncker was Prime Minister. Large companies had an orgy in tax avoidance in Luxembourg. One week in his new job, Mr. Juncker faced a new crisis when the International Consortium of Investigative Journalists ICIJ published details about Luxembourg’s tax rulings. The disclosures were based on documents stolen from PwC. Mr. Juncker survived a censure vote instigated last week by Europhobes in the European Parliament based on Luxembourg’s tax rulings. Mr. Juncker went from silent to denial, to “others do it”, before gradually sliding towards an alternate position: he vowed a major initiative by his Commission to make tax rulings transparent and reportable.

At the Commission, Mr. Juncker can now write his own job description, as the contours of his duties are in an impressionistic haze. He might surprise more than one if History repeats itself. I’m suggesting that in the Middle-Ages the Prince-Electors of the Holy German Empire would often choose Luxembourg Princes to become Emperor, as they were perceived as weak and creating no harm. Charles IV however defeated the low expectations and became one of the most powerful emperors ever, unifying power in his hands as King of Bohemia and Holy German Emperor during a reign of 32 years (1346-1378). Are we following this medieval template? Mr. Juncker is already the 3^rd Luxembourger to hold that Presidency in a list of 12. Will he be Charles V?

For the moment, he is touting a 315 billion euros investment package. This could be his first tour of magic, as the money is not available. The European Investment Bank is cited and others including private investors. This exhibition of mostly notional capital to kick start the European economy sounds like Maynard Keynes spending Milton Friedman’s money. A real party, but BYOB. Bring Your Own Billions.