Ethics and governance in the European Financial centers

Jean Asselborn was interviewed by RSR in Switzerland about Luxembourg tax policy.

 

What he said confirms that Luxembourg did rely on the European Union to provide solidarity (read impunity).

 

« L’UE c'est une communauté solidaire. »

 

Free translation: "The EU, it is a community where there is solidarity."

 

« Cette inscription, vous savez, sur la liste noire qui est devenue grise, ce n'était pas accordé au Conseil européen, ce n'était pas l'engagement du Conseil européen. Ça va à l'encontre de ce qui a été décidé »

 

Free translation: "This inscription, you know, about the black list which became grey, it was not granted at the European Council, it was not the commitment of the European Council. That goes against what was decided"

 

 

The relevant question is: is tax competition fair within the European Union?

 

According to many politicians and professionals in the European secrecy jurisdictions, and especially Luxembourg that is locked up in its certainty, it is because taxes are too high in France and Germany that taxpayers look for another jurisdiction.

 

Let’s admit they are right. What should be done to change that?

 

I have already observed that our European secrecy jurisdictions do not contribute a lot to the OECD budget despite a much more favourable GNP/GDP than in France and Germany.

 

What about the European Union figures?

 

The budget of the EU is a “gas factory”, but some ratios are interesting.

 

In 1970, the Luxembourg National contribution amounted to 0,1533% (6 / 3913*100) of the six countries. In 2007 it amounted to 0.2% (198 / 93414*100) of the 27 members while the jurisdiction has the highest GDP per capita

 

All figures for the calculation are available there: (The Excel Table is there)

 

 

It is easier for Luxembourg to have low taxes than for other jurisdictions and especially France and Germany all the more than Luxembourg does not have all the infrastructures that are needed in a larger state and that it profited from those (for example Universities in France and Germany: the fee for students, either national or foreign, does not cover all the direct or indirect functioning expenses that are financed by the taxpayer: buildings, scientific material, transportation…).

 

Example: the fee for a student is EUR 169 (year 2008-2009: http://www.nouvelleuniversite.gouv.fr/droits-d-inscription-pour-la-rentree-universitaire-2008.html). The cost of a student is around EUR 7000.

 

Who pay for the difference?

 

One can extend the benefit to research.

 

For example, if Luxembourg contributed to the implementation of the TGV (Train à Grande Vitesse, French for "high-speed train") between Luxembourg and Paris, I don’t think it contributed when it was developed during the 1970s by GEC-Alsthom (now Alstom) and SNCF.

 

 

In a nutshell, other criteria should definitely be sought to ensure a more balanced contribution of member states, taking into account the GDP per capita and expanses for the benefit of citizens of other states that do not have to pay for them (especially research and infrastructures).

 

And I bet Luxembourg will no longer be qualified as a tax haven as it would have to increase its taxes to pay for such more pragmatic European contribution…