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Europe

LuxLeaks tax avoidance scam goes to trial

The discovery of tax avoidance practices among multinational corporations in Luxembourg led to an EU-wide scandal in 2014. Now, whistleblower Antoine Deltour and two accomplices are on trial.

Antoine Deltour discovered a massive tax scam and must now stand trial.

"We have come to support Antoine and to demand more tax fairness," says Odile Delahye. She and about one hundred demonstrators have come to the Luxembourg courthouse by bus from Deltour's hometown of Epinal. The supporters are determined and in a good mood: They see Deltour, a former employee of the accounting giant PricewaterhouseCoopers (PwC), as a hero. That is why they have started an internet campaign to raise money for his defense.

Whistleblower on trial

Antoine Deltour arriving at the Luxembourg courthouse

Antoine Deltour arriving at the Luxembourg courthouse wonders why he's on trial

Oddly, none of the 340 multinational corporations are on trial for successfully using the so-called "Tax Rulings" outlined by Luxembourg's Ministry of Finance to avoid paying European taxes on their massive earnings. In Luxembourg, 80 percent of all "intellectual property" is tax-free, as a consequence a lot of profits from companies like Apple, IKEA, FedEx, Pepsi and Disney have been amassing in the grand duchy. Rather, Antoine Deltour, who went public with 28,000 pages of tax files, is currently on trial alongside his colleague Raphael Halet and journalist Edouard Perrin. They now face charges for theft, illegally accessing a computer database and for divulging trade secrets. According to Luxembourg law, the three could face up to ten years in prison.

Perrin was the first person to publish the story back in 2012. At the time, however, there was little reaction. It was not until 2014, when German newspapers picked up on the affair and the newly elected president of the European Commission, Jean-Claude Juncker, came under massive pressure, that it became a full-blown scandal. Juncker, who had been prime minister as well as finance minister in Luxembourg, had tolerated if not pushed such practices for years. Nevertheless, he swore there was nothing illegal about such business deals and scraped past removal from office when the scandal broke. Meanwhile, an investigative committee in the European Parliament is attempting to clear up the affair, and EU finance ministers have agreed on initial policy changes: Mutual disclosure requirements for tax rulings - essentially tax saving agreements with multinational corporations - are intended to make it easier for financial authorities to access data from other countries in order to rightly tax such corporations.

A political embarrassment

Jean Claude Juncker

Jean-Claude Juncker served as prime minister and finance minister of Luxembourg for mayn years

The trial at the Luxembourg criminal court opened as a decidedly boring legal affair rather than a political thriller. For hours, a witness from PwC was questioned about how well the secret tax files in the database were protected, and whether Deltour could have discovered them by chance or would have had to search for them. Defense attorney Philippe Penning was happy with the first day of the trial: "We were able to demonstrate that Deltour did not search for the files," that is an important legal fact. He praised the court, commenting that the atmosphere was quiet and reserved. The political portion of the trial will come in a few days, when the accused testify before the court.

Although supporters demand that the court honor the defendants rather than sentencing them, the men also have their critics. They are accused of having damaged Luxembourg's reputation. Deltour maintains that he acted out of conviction. In contrast to other world-famous whistleblowers, like Julian Assange and Edward Snowden, Deltour has avoided the public eye. After the first day of the trial he exited the courtroom via a side door and took no questions from the press.

Defense attorneys have refused to comment on possible punishment as well. Observers believe that the court could attempt to save face by delivering a minimum sentence - for a harsh penalty would only serve to compound the political damage. In that sense it is rather astonishing that the accounting firm PwC even pressed charges. Wasn't the scandal itself embarrassing enough?

Protecting whistleblowers

Luxemburg Prozess LuxLeaks

Odile Delhaye came to support Deltour and demand tax fairness

Members of an NGO opposed to tax havens is demonstrating in front of the courthouse: "We need more transparency and new laws to ensure such scandals don't happen again," demands activist Louise Rehbinder. And Fabio di Masi, a European parliamentarian for the Left parliamentary group exclaims: "Many Europeans know that Antoine Deltour did the right thing. He should be honored for his actions not persecuted. But justice will be served."

Di Masi, along with his colleague Sven Giegold of the Green party, will also take the witness stand during the trial. Both men are involved in the investigation of the affair in the European Parliament. Both also demand more protection for informants: "Whoever comes forth with information that is in the public interest must be protected," says di Masi. Even Jean-Claude Juncker supports such calls - although the European Commission must finally present proposals to change existing laws.

Meanwhile, however, Parliament has ratified new guidelines for the protection of trade secrets, the aim of which runs contrary to calls for whistleblower protection. According to the guidelines, corporations could simply declare any information to be a trade secret, making the dissemination thereof punishable by law. "The only reason the guidelines passed was because of massive pressure from industry," di Masi said.