Mere days into his tenure as president of the European Commission (the EU’s executive branch), Mr. Juncker, who was Luxembourg’s prime minister from 1995-2013, found himself under bombardment by media and political rivals for deals made over the years between his government and international companies seeking relief from taxes.
The subject at hand – whether the tax terms negotiated between Luxembourg’s government and the individual companies constituted illegal “state aid” under EU rules – is complex, as are the financial structures involved.
The media coverage of it has been predictably oversimplified, containing the usual hallmarks and catchphrases (i.e., “a flood of leaked documents” from a “tiny country” everyone knows is a “tax haven” with “freewheeling ways”) that too-often substitute for substantial reporting and that serve to demonize small independent states and large profit-motivated entities.
Our primary concern here is not whether Luxembourg’s deals pushed the EU’s line or stepped over it (That’s a matter to be decided within a court, and not the court of public opinion) or whether Mr. Juncker’s prior leadership of Luxembourg conflicts with his current position in the European Commission (We doubt it does).
Rather, this Editorial Board supports Mr. Juncker and Luxembourg (which, by the way, has 10 times the population of Cayman) based on the following principle: Every country must be able to write and enforce its own tax laws, without external interference, and without being compelled to act as another nation’s collection agency.
Cayman’s financial services sector has been build on this self-evident principle.
A nation’s sovereignty is determined by its government’s ability to determine taxation policy within its borders. Neither Mr. Juncker nor current Luxembourg officials should retreat a centimeter from their backing of legal practices and economic strategies that have transformed Luxembourg into Europe’s wealthiest country, per capita – particularly not if the reason is pressure from outside opponents envious of Luxembourg’s successes.
Neither, too, should Ireland or the Netherlands, which are similarly under “investigation” by the European Commission for their respective agreements with Apple and Starbucks.
Nor, for that matter, should Cayman.
Indeed, our country needs far greater, and far more vocal, engagement from our government and our private sector whenever offshore financial centers, such as ourselves, are vilified by big-government and high-tax advocates across the world.
Admittedly, we may be no experts on complex corporate structures, but we do know something about public relations and communications. The posture Cayman has adopted in relation to managing the country’s international profile is far too defensive – reactive rather than proactive.
Cayman’s tactics of “hunker down,” “let it pass,” “send a press packet, maybe” might have been sufficient years ago, but major nations’ spotlight on smaller competitors is brighter, and hotter, and more misplaced than ever.
The attacks on Luxembourg may seem a bit far afield from Cayman, but as contributor Oliver Treidler described in the current issue of our sister publication, Cayman Financial Review, the fight over taxes in the EU (to which Cayman is linked via the U.K.) has blossomed into an “all-out war.”
In this war of “us versus them,” whom Cayman should be supporting is quite clear: Mr. Juncker, and Luxembourg. They are, in this case, “us.”