LUXEMBOURG: April 26, 2016. Two former PricewaterhouseCoopers (PwC) employees and an investigative journalist have gone on trial in Luxembourg accused of leaking confidential information on over 300 companies that registered in the country between 2002 and 2010 to avoid tax liability.
Many of the tax loopholes were prevalent when current European Commission (EC) president Jean-Claude Juncker was Luxembourg’s prime minister and finance minister.
Following a complaint by PwC, two former employees Antoine Deltour and Raphael Halet are being prosecuted for passing hundreds of documents to Edouard Perrin, a member of the International Consortium of Investigative Journalists (ICIJ) that published a report in November 2014 on how Luxembourg had effectively become a tax haven within the EU.
A statement from Luxembourg's Finance Ministry said at the time that while its behavior had been "totally legal", it acknowledged that since the Great Recession of 2008 "the legitimacy of certain mechanisms, which are compliant with international law, is put in doubt".
Finance minister Pierre Gramegna (pictured right) declared Luxembourg now "believes that it is not acceptable that companies take advantage of the international legal framework to avoid de facto all taxation" and the international community "needs to adapt to today's realities".
After the ICIJ revelations, Juncker denied any wrongdoing and has since backed plans by the EC, the Luxembourg government, the OECD and the G20 to introduce tax avoidance measures.
This week the EU’s 28 finance ministers agreed Member States will require multinational corporations operating in Europe to report their earnings and taxes on a country-by-country basis in a bid to curb profit shifting and corporate tax avoidance. The Commission estimates that Europe’s governments lose €70 billion to corporate tax avoidance each year.
The new rules are expected to be adopted by June and be applied to foreign companies with European subsidiaries from 2017.
According to corruption watchdog Transparency International (TI), most European countries do not have whistleblower protection laws. Although Luxembourg has such a law, Deltour is not considered a whistleblower because the legislation is limited to corruption offences. In addition, it only protects whistleblowers against dismissal, not against prosecution.
The former PwC auditor faces charges of theft, violating Luxembourg’s professional secrecy laws, violation of trade secrets and illegally accessing a database. If found guilty he could be sentenced to 10 years in jail and fined up to €1.25 million.
“Deltour should be protected and commended, not prosecuted. The information he disclosed was in the public interest,” said Cobus de Swardt, TI managing director.
ICIJ director Gerard Ryle said Perrin’s indictment for doing his job as a journalist was an affront to press freedom and the charges against the others showed that Luxembourg was "recklessly dismissive" of the role whistleblowers play in ensuring transparency.
“For a founding member of the EU to bring charges against a journalist in relation to reporting that is clearly in the public interest shows a lack of respect for the important role journalism plays in holding the powerful accountable. For a country to also charge two alleged whistleblowers shows Luxembourg has not yet caught up with public opinion,” Ryle added.