Nick Shaxson ■ On the Capture of Luxembourg by Big Accountancy Firms
UPDATE: TJN is among a host of signatories to a letter (published here) calling on the Luxembourg authorities to refrain from prosecuting whistleblower Antoine Deltour. In the letter we note that even the Luxembourg government has publicly recognised that the information revealed by M Deltour has uncovered market information crucial to the proper functioning of the European Union’s internal market, and its release has served the public interest. Read our letter here, and the accompanying Guardian article here.
From Reuters, in the wake of the sprawling #Luxleaks scandal, and the attacks on the PWC whistleblower Antoine Deltour, a fascinating story about the power of large accountancy firms in Luxembourg, a quote, highlighted in bold:
“So close are some to the new government that Ernst & Young’s local boss helped negotiate the coalition deal that saw Xavier Bettel succeed Juncker as prime minister a year ago.
. . .
Alain Kinsch of E&Y told a local newspaper last year while he was acting as a coalition negotiator for Bettel’s liberal party that others from the Big Four accounting firms had no need to play such a public political role to have access to ministers:
“If I really wanted to wield any influence, trust me, I wouldn’t have chosen this route. I would have kept behind the scenes and would have been able to wield influence differently.”
“Trust me.” All part of the phenomenon of “state capture” that is especially strong in small tax havens like Luxembourg, and part of the broader Finance Curse. The interests of the state and the interests of large accountancy players have become so profoundly merged that the players quoted here cannot seem to see or appreciate the depths of the conflicts of interest at play.
Now read the rest of it. It highlights what we’ve often pointed to before: the highly libertarian, lax regulatory approach to financial regulation, summed up by the head of Luxembourg for Finance, a peculiar public-private lobbying group for the tax haven:
“In other countries, things that weren’t expressly allowed were forbidden. . . In our view, whatever is not forbidden is worth being considered for its business potential.”
And that attitude, of course, opens the door to the facilitation of a wide range of abusive behaviour: there are usually good democratic reasons for forbidding certain things. There is also the small-state paranoia about larger foreign states:
“Norbert Becker sees foreign aggression: “I see an invisible hand which is interested in attacking Luxembourg and thereby weakening the president of the European Commission,” he said.”
There’s the pointing the finger elsewhere, to deflect blame, as always, and Reuters cites today’s TJN blogger in rebuttal:
“Luxembourg has made a national strategy out of picking the pockets of other countries and very aggressively going after every niche they can think of,” said Nicholas Shaxson, author of [the tax haven book] “Treasure Islands”.
For an exploration of the wider political phenomenon of ‘financial capture’ or state capture by financial interests, see any of the long narrative reports for our Financial Secrecy Index (e.g. Luxembourg, British Virgin Islands, Ireland, Cayman – just for example.) For a longer descriptive essay about this, see the “Ratchet” chapter in Treasure Islands.
Oh, and in case anyone didn’t notice, Juncker, the main architect of the modern tax haven of Luxembourg, is now President of the European Commission.
Sign a petition to support the #Luxleaks whistleblower Antoine Deltour.
Also see: Tax Haven Whistleblowers: Where are the Human Rights organisations? And spare a thought for other tax haven whistleblowers: Rudolf Elmer, Hervé Falciani, and others.
A final note, to leave the reader to conjure up the image of the ‘captured state’ for themselves:
“But walk through the hilly streets of the historic fortress city, past apartment buildings housing postal addresses for international companies, and it is hard to find many who agree [with the dissidents].
Enjoying potato fritters and mulled wine at a Christmas market, teacher Arnaud Hoffmann said Luxemburgers had nothing to be ashamed of: “It’s just the other countries that are jealous.”
Just picture that idyllic scene. Financial capture, from the top to the bottom.
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28 January 2021