EU to press Luxembourg over tax breaks amid fresh allegations

Ex-Luxembourg PM Jean-Claude Juncker is facing a tough first week as EU Commission president

The European Commission is to press Luxembourg over new allegations it offered tax breaks for more than 300 global companies, an EU spokesman says.

But Commission chief and ex-Luxembourg PM Jean-Claude Juncker will not handle the probe, Margaritis Schinas said.

Pepsi and Ikea are among those accused of making deals with Luxembourg to save billions in tax in other countries.

The revelations were published in a report by the International Consortium of Investigative Journalists (ICIJ).

Luxembourg is already under investigation by the EU over suspected "sweetheart" tax deals with online retailer Amazon and the financing arm of carmaker Fiat.

Two other member states, Ireland and Malta, are also being investigated as part of the EU's crackdown on multinationals' tax avoidance schemes.

Luxembourg Prime Minister Xavier Bettel has insisted that the deals abided by international rules on tax, in comments reported by AFP news agency.

Analysis: Theo Leggett, business correspondent

The suggestion that multinational companies channel profits through Luxembourg-based subsidiaries in order to minimise their tax bills is hardly new.

What this research appears to show - with the help of thousands of pages of leaked documents - is just how widespread the practice has been, and the extent to which it has effectively been endorsed by the Luxembourg authorities.

The important point is that these arrangements are not in any way illegal as far as the companies themselves are concerned - in fact many of the leaked documents are so-called "comfort letters" from the Luxembourg authorities specifically endorsing individual schemes.

However, the findings are likely to be politically sensitive.

It could all make life rather uncomfortable for the new European Commission President, Jean-Claude Juncker - a former prime minister of Luxembourg, on whose watch many of these deals were done

'Less than 1% tax'

The ICIJ said a team of 80 journalists had pored over nearly 28,000 pages of leaked documents showing tax agreements and returns relating to more than 1,000 businesses.

It says the companies created "complicated accounting and legal structures that move profits to low-tax Luxembourg from higher-tax countries where they're headquartered or do lots of business".

Mr Juncker has asked EU Commissioner for Competition Margrethe Vestager to lead the investigation

In some cases, it adds, companies enjoyed tax rates of less than 1% on profits moved into the European duchy.

"The Duchy of Luxembourg has a legitimate government that has to provide answers to the investigation opened by the Commission," the EU Commission's spokesman Margaritis Schinas told reporters on Thursday.

When pressed repeatedly about Mr Juncker's role in the probe, Mr Schinas said that EU Competition Commissioner Margrethe Vestager would take charge of the current investigation.

"She will request the appropriate information, enforcing the rules, as is the duty of the European Commission," he added.

The leaked papers related to some 340 companies, including FedEx, Accenture, Burberry, Procter & Gamble, Heinz, JP Morgan, Deutsche Bank.

The deals - which the ICIJ says were legal - were facilitated by the international tax advisory group PricewaterhouseCoopers.

The Guardian, which was one of the media outlets working on the probe, said it painted "a damning picture of an EU state which is quietly rubber-stamping tax avoidance on an industrial scale".

Luxembourg was "like a magical fairyland," the paper quotes former senior US Treasury official Stephen Shay as saying.