Ethics and governance in the European Financial centers

Last February AOL France was fined by the French fiscal administration because of its hub in Luxembourg.
As I already wrote I am not certain such hubs are the interest of the financial center as they feed a bad reputation of tax haven.

Le Jeudi, a couple of days ago published an article stating that AOL would leave in April 2008. The article does not explain the problem with the French fiscal administration.

The MP Claude Meisch AOL.pdfasked a parliamentary question the wording of which demonstrates how people in Luxembourg are upset despites it is good news for the core financial center that is weakened by tax stories.

Furthermore, as Sheila Killian wrote about Ireland but is is true as well for Luxembourg, the center is becoming the victim of its own success. Prosperity has brought high wages, impossible property prices and inflation. This has become an expensive place in which to live and do business. Basic products can be manufactured more cheaply elsewhere, and basic manufacturing jobs are beginning to move to Eastern European and developing countries. The low rate strategy was simple, effective, and inherently unsustainable. Tax competition produced a “race to the bottom” in terms of tax rates, and average rates tumbled across the EU. Ireland’s tax rate is still among the lowest at 12.5 per cent, but Poland’s 19 per cent may be more attractive to a company that can make more profit there."

The Irish Tribune has reported large companies, like Dell, are already quitting Ireland lis AOL is leaving Luxembourg.

As Richard Murphy explained "The simple fact is that capital tends to locate where the best returns are and tax competition can at best only put a temporary blip in this process in favour of one location over another before rates must be lowered again".





Parliamentary question (in French)