Monday, October 24, 2022
Leandra Lederman (Indiana-Maurer; Google Scholar) presents How Did Luxembourg Become a Tax Rulings Haven? at UC-Irvine today as part of its Tax Policy Colloquium:
In November 2014, the International Consortium of Investigative Journalists (ICIJ) broke the “LuxLeaks” scandal, revealing hundreds of billions of dollars of “sweetheart deals” given by the small country of Luxembourg to large multinational enterprises, including many name-brand U.S. companies. Although others have written about this headline-news international scandal, which revealed hundreds of previously confidential tax rulings, this Article is the first to explain where Luxembourg’s opaque rulings process came from and the elements that allowed it to be so prolific. This Article is also the first to fully explain the timing of Luxembourg’s reform of its rulings process in relation to the ICIJ’s investigation. The heart of this Article is an original theory regarding the conditions that allow this kind of special tax arrangement to flourish. Using Luxembourg as a case study, the Article argues that three elements were critical: (1) amenability of the tax administration, (2) trust in that administration by tax advisers and (3) secrecy.
Moreover, the same three factors can be found in the alleged “information letter” process that reportedly arose shortly after LuxLeaks and was recently revealed in the “LuxLetters” scandal.