EU's Juncker vows tax crackdown as Disney, Microsoft hit by 'LuxLeaks' scandal

EU Commission president Jean Claude Juncker signs a guest book before his solemn undertaking on Dec 10, 2014 at the Court of Justice of the European Union in Luxembourg. Juncker vowed Wednesday to fight tax avoidance in Europe after new revelations s
EU Commission president Jean Claude Juncker signs a guest book before his solemn undertaking on Dec 10, 2014 at the Court of Justice of the European Union in Luxembourg. Juncker vowed Wednesday to fight tax avoidance in Europe after new revelations showed Disney, Microsoft and Koch Industries got bumper tax deals from Luxembourg when he was prime minister. -- PHOTO: AFP

BRUSSELS (AFP) - EU Commission chief Jean-Claude Juncker vowed Wednesday to fight tax avoidance in Europe after new revelations showed Disney, Microsoft and Koch Industries got bumper tax deals from Luxembourg when he was prime minister.

They were among dozens of companies dragged into the Luxembourg tax avoidance "LuxLeaks" scandal with the release of a new wave of documents by investigative journalists on Tuesday.

The revelations, including that entertainment giant Disney, the home of Mickey Mouse, paid just over a quarter of one percent in tax, increase pressure on Juncker over Luxembourg's tax policies during his 19 years in office.

As he arrived in Luxembourg for his official swearing in after taking the helm at the Commission in November, Juncker reiterated that tackling tax avoidance had been one of his campaign promises earlier this year.

"For tax harmonisation, the coordination and bringing together of tax policies is an absolute necessity. I will do it," Juncker told reporters as he went into the European Court of Justice for the ceremony.

But Juncker, who turned 60 on Tuesday, hinted that the scandal was being used as a way to attack him in his first weeks in the job, saying that the timing of the leaks was "not a coincidence".

In an interview published earlier Wednesday, Juncker said he had been "weakened" by the scandal but repeated his insistence that he was not personally involved in the deals for major corporations.

'AGGRESSIVE TAX STRUCTURES'

The first instalment of LuxLeaks documents in November revealed that hundreds of the world's biggest companies brokered secret deals with Luxembourg to avoid paying billions of dollars in taxes.

The new claims emerge from 28,000 pages of documents obtained by the International Consortium of Investigative Journalists (ICIJ) and examined by dozens of newspapers.

They detail "aggressive tax structures" brokered for major companies by accountants Ernst & Young, KPMG, PwC and Deloitte between 2003 and 2011.

The reports say Internet calling business Skype, owned by Microsoft, used an Irish subsidiary to allow its Luxembourg unit to report no corporate tax over five years.

Meanwhile, Koch Industries - owned by the powerful US conservative political donors the Koch brothers - and the Walt Disney Company had complex arrangements to channel "hundreds of millions of dollars in profits through Luxembourg" from 2009 to 2013 and pay little tax, the ICIJ said.

Canadian aerospace giant Bombardier and communications firm Telecom Italia are also named in the documents, according to Belgian newspaper Le Soir, which reported that Disney was afforded a 0.28 per cent tax rate in the arrangements.

British newspaper The Guardian reported that the new documents name major consumer goods company Reckitt Benckiser and Lycra company Invista, owned by the Koch brothers.

SIX-MONTH DEADLINE

Juncker easily survived a vote of confidence in the European Parliament in November over LuxLeaks, in which he had the backing of his own centre-right group, plus the rival socialists.

But when asked Wednesday if the socialists might now withdraw their confidence, leader Gianni Pittella gave Juncker six months to come up with proposals to settle the tax avoidance problem.

"The trust we've instilled in him is not a blank check. It is conditional on his actions," Pittella told a press conference.

Commission spokesman Ricardo Cardoso said Juncker would not stand down.

The November leaks, which named companies including Apple, Pepsi, IKEA and Heinz as tax breaks beneficiaries while Juncker was prime minister, hit less than a week after he took office at the head of the European Commission.

The European Commission has fought back on the issue, announcing agreements on Tuesday to close loopholes and to ensure the exchange of tax information between the EU's 28 member states.

Since June, the commission has also launched investigations into the tax affairs of Amazon and Fiat in Luxembourg, Apple in Ireland and Starbucks in The Netherlands to determine whether sweetheart tax deals could constitute illegal state aid.