Sven Giegold

LuxLeaks trial: refusal of EU Commissioner Vestager to give evidence is a poor show

Today, the first week of court proceedings against the LuxLeaks whistleblower comes to an end. The hearings of evidence is to be concluded on the 4th of May as well as the pleadings of the defence lawyers, followed by the prosecutor. If more time is needed also the 10th of May might be used. This Thursday, MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group, gave evidence as witness of the defence (his testimony can be found below). His take on the court hearings:


“It is a poor show that EU Commissioner Margrethe Vestager refused to give evidence in front of the court. As Commissioner for competition, Vestager could have supported for justice with her testimony. Nobody else has more credibility than Vestager in witnessing the public interest in the whistleblowing of Deltour and in the reports of the journalist Perrin. Vestager’s own state aid investigations are also based on information retrieved from the whistleblowing. The absence of Vestager fits very well into the picture of an European Commission which hesitates to effectively protect whistleblowers. So far, the European Commission has refused to propose a directive for the protection of whistleblowers which the European Parliament had called for by June. Since the European Commission doesn’t act, the Greens will make a fully fledged proposal for a draft of a European whistleblower protection directive next week. For us as Greens it is clear: Whistleblowing must not be at personal risk. People acting in the public interest must be able to rely on the protection of the society.

It would be disastrous if the trial against the LuxLeaks whistleblowers discouraged others willing to defend the common good. With its complain, Pricewaterhouse Coopers (PwC) does the public interest a disservice. If PwC took the spirit of its internal Code of ethics seriously, it would never have brought in this morally highly questionable action against the whistleblowers. In my testimony I highlighted that Antoine Deltour has elucidated the violation of European tax law since 39 years.”

Code of ethics of PricewaterhouseCoopers:


The chronology of the tax ruling scandal can be found here:




Written summary of my testimony under oath which I gave in French to the tribunal in Luxembourg in my function as a witness of the defence of the accused Antoine Deltour.

My role


As member of the European Parliament of the German Green Party I am the spokesperson of the parliamentary group Greens/EFA in the Committee of Economic and Monetary Affairs (ECON) in the European Parliament and in the Parliament’s special Committees TAXE and TAXE II. Moreover, I was in charge of the political coordination of the campaign which led to the creation of the European Parliament´s Special Committee TAXE. I have been working on financial markets, tax havens and financial policy for many years.


The practice of tax rulings was illegal


The practice of tax rulings in Luxembourg and other EU member states was illegal. These tax rulings constituted a threefold violation of European law, as the TAXE Special Committee of the European Parliament stated in point 86 of its final report:

  1. They violated the Council Directive 77/799/CEE on the cooperation of adminstrations in the area of direct taxes. Since 1977, article 4 of the directive stipulates that tax agreements which reduce taxation in other EU member states should be spontaneously exchanged with the affected member states. But this did not happen.
  2. They violated the principle of sincere cooperation between member states as laid down in article 4(3) of the European Treaties.
  3. They violated EU state aid rules. The tax rulings created advantages which were not notified to the EU Commission. As a result of two exemplary state aid investigations, out of which one concerned Luxembourg, the beneficiary corporations in the mean time have been obliged to repayments.


I do not know the precise magnitude of tax rulings in the EU – i.e. its quantity and economic meaning – since many member states – including Luxembourg – rejected to provide precise data to the European Parliament. Moreover, Luxembourg’s finance minister Gramegna promised a “vademecum on economic substance”, which has never been provided. The cooperation of many member states with our committee in the EU Parliament has been insufficient.


Deltour acted in the public interest and the results prove him right

The problems with tax rulings were known to the member states and the European Commission at least since 1999, in Luxembourg respectively since 1997 as revealed by the secret report Krecké.

In 1999, a study on these administrative tax practices by the consulting firm “Simmons & Simmons”, which had been ordered by ECOFIN and had been kept under tight wraps for a long time, uncovered that tax rulings are widely used within the European Union. However, according to the study only in four countries there is relevant room of discretion for the tax authority when it comes to tax rulings: Belgium, France, the Netherlands and Luxemburg. The study from 1999 explains that there was no specific legislation providing for tax rulings in Luxembourg and that the administration is only bound by the general principle of good faith. The study was updated in 2009 and confirmed the results from 1999.

The “Code of Conduct group on business taxation”, a group set up by the EU finance ministers, repeatedly discussed the issue behind closed doors, including 2009, 2010, 2011, 2012 and all subsequent years. Documents and meeting minutes of the “Code of Conduct group” of the Council prove that the measure of exchanging the tax rulings with other member states as set out in EU legislation was generally omitted. Only through the non-transparency of the tax rulings their full economic “value” for the respective companies could unfold. Following that, the problem was known by the European Commission since 1999. Since 1977, the exchange of tax rulings was mandatory by law. This duty has been irgnored by the member states for 39 years. Although obliged to open state aid investigations into the fiscal state aid granted by member states, the European Commission did not do so.


Only the revelations of Edouard Perrin, co-defendant, and of the International Consortium of Investigative Journalists ICIJ in particular, triggered the discussion about the breach of law via tax rulings. Antoine Deltour was the game changer. Deltour acted indisputably in the public interest.


In response to the ICIJ revelations, the European Parliament set up the Special Committee TAXE in 2014, which made far-reaching demands for the reform of European tax policies in its final report. Furthermore, the European Commission proposed to replace the compulsory spontaneous exchange of rulings between member countries by a compulsory automatic exchange. In October 2015, the Council unanimously agreed on the automatic exchange under the Luxemburg presidency. The Member States as well as the Luxemburg government thereby admitted that the current legal framework had not been respected and therefore needed to be tightened.

An effective exchange of rulings in Luxemburg only began in February 2016. This becomes clear from confidential minutes from the German government of the meeting of the Code of Conduct Group that took place 12 April 2016.

After the publications by ICIJ, the EU Commission has so far opened state aid investigations for tax rulings in five cases (Amazon / Luxemburg , Fiat Finance Trade / Luxemburg, Apple / Ireland, Starbucks / Netherlands and McDonald’s / Luxembourg), of which two (Fiat Finance and Starbucks) have been concluded. In both cases, tax reimbursement claims were made amounting to millions of euros. The EU Commission hereby made direct use of the information from the ICIJ.


Insufficient protection of whistleblowers


The final report of the Special Committee TAXE highlights the importance of whistleblowers and demands their protection by European law. Point 144 states: “[The European Parliament] calls on the Commission to propose, by June 2016, an EU legislative framework for the effective protection of whistleblowers and the like; stresses that it is not acceptable that citizens and journalists can be subject to prosecution rather than legal protection when, acting in the public interest, they disclose information or report suspected misconduct, wrongdoing, fraud or illegal activity, in particular in cases of tax avoidance, tax evasion and money laundering, or any other conduct infringing the fundamental principles of the EU, such as the principle of sincere cooperation”.

Unfortunately, such an EU legal framework does not exist yet. However, the European Parliament adopted a contested directive on the protection of trade secrets two weeks ago. This directive strengthens the protection of trade secrets in Europe, while, in my opinion, not offering sufficient protection for whistleblowers. However, even this directive foresees in article 5 that all provisions for trade secrets should not be applied, where the alleged acquisition, use or disclosure of the trade secret was carried out for exercising the right to freedom of expression and freedom of the media or to reveal misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest. Furthermore, recital 19 of this directive clarifies that neither any measure, nor procedure or legal act of this directive should constrain whistleblowing.

Thus, even this contested directive – if implemented correctly in national law – would have protected the defendants. The defendants have not only revealed an extreme case of legal tax avoidance, but have also revealed unlawful activities in several regards and thus contributed decisively to the termination of this breach of law. The above-mentioned EU directive is not yet applicable in this current case, but nevertheless shows the will of the European legislators.

PWC’s own ethical rules themselves reveal why Deltour’s activities are understandable


Pricewaterhouse Coopers has an own code of conduct entitled “Doing the right thing – the PwC way”. This code of conduct ends with a “Summary of ethical questions to consider”, including:

“2. Does it feel right? // 5. Who else could be affected by this (others in PwC, clients, you, etc.)? // 6 Would you be embarrassed if others knew you took this course of action? // 8. How would it look in the newspapers? // 9. What would a reasonable person think? // 10. Can you sleep at night?”

These questions reveal the moral conflicts, which tax advisors and financial auditors may face when helping corporations to reduce their effective tax rate on income to levels as low as one percent.

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