OpenLux: Luxembourg, a tax haven at the heart of Europe
OpenLux : the secrets of Luxembourg, a tax haven at the heart of Europe
          Julien Pacaud                      Les Décodeurs                Publié le 08 février 2021 à 06h00, modifié le 09 février 2021 à 22h56       EnquêteMultinationals, billionaires, artists, sportsmen, criminals : an investigation by Le Monde reveals for the first time exhaustively what the Grand Duchy’s financial centre conceals, thanks to its tax advantages.                                       It is a well-kept secret, a persistent mystery, a question that has been unresolved for years : what is the financial centre in Luxembourg hiding ? What would we find if we opened the safe of this tiny State located in the heart of the European Union, listed by many researchers in the world’s top 5 tax havens ? The OpenLux investigation, conducted by Le Monde along with ten media partners for more than a year, provides answers : 55,000 offshore companies managing assets worth at least 6 trillion euros.          These phantom companies without offices or employees were created by billionaires, multinationals, sportsmen, artists, high-ranking politicians and even royal families. Luxembourg acts as a magnet for the wealth of the world : in a territory of 2,586 km2, Tiger Woods and Cristiano Ronaldo rub shoulders with Shakira and the King of Bahrain. Hundreds of multinationals (LVMH, Kering, Altice, Pfizer, Amazon…) have opened financial subsidiaries. Wealthy families increase their real estate assets there.               More surprisingly, OpenLux reveals that questionable funds, suspected of originating in criminal activity or linked to criminals targeted by judicial investigations, have been concealed in Luxembourg. This is the case of companies linked to the Italian Mafia, the’Ndrangheta, and the Russian underworld. The League, Italy’s far-right party, has hidden a secret fund which is sought by the Italian authorities. People close to the Venezuelan regime have recycled corrupt government procurement funds.          To conduct this investigation, Le Monde has compiled a huge database that lists the beneficiaries of the 124.000 commercial companies registered in Luxembourg, i.e. their true owners, along with 3.3 million administrative acts and financial reports. These are documents that have recently been made public, but are only available on the Luxembourg trade register website. Le Monde was able to extract them in their entirety for analysis, in partnership with the Suddeutsche Zeitung in Germany, Le Soir in Belgium, McClatchy in the United States, Woxx in Luxembourg, IrpiMedia in Italy, and the OCCRP Consortium of investigative journalists.          157 nationalities represented          These investigations confirm that the Grand Duchy is, contrary to what the Luxembourg authorities claim, a veritable offshore centre, halfway between the City of London and the British Virgin Islands. Nearly 90 % of its « companies » are controlled by non-Luxembourgers. Among the 157 nationalities represented in this amazing « Who’s who », the French stand out : they head the list with, in total, more than 17.000 companies.               What they house is surprising : valuable property, here a castle near Paris owned by a Saudi prince, there a vineyard in Provence owned by Angelina Jolie and Brad Pitt, and an endless list of villas on the French Riviera and well-appointed Parisian apartments. But also flagships of the French economy, such as Yves Rocher, Chanel, JCDecaux and Decathlon. It’s almost as if Luxembourg owned small pieces of France.                     The case of France is not isolated : it is also through Luxembourg companies that some investment funds buy whole swathes of cities such as Berlin and London, causing real estate prices to rocket without being identifiable or paying taxes. The list of international assets held in Luxembourg is a gigantic inventory, including luxurious residences, chalets, yachts, helicopters, private jets and big planes, music catalogues, the rights to images, works of art, in short, the list is endless.          In total, as confirmed by the list of 64,458 beneficiaries identified by OpenLux : the Grand Duchy of Luxembourg concentrates a large part of the world’s wealth. It is home to at least 279 of the more than 2,000 billionaires listed by Forbes magazine. But also 37 of the 50 wealthiest French families, such as the Mulliez, Guerrand-Hermès and Bernard Arnault, who structure their group, their assets and their investments through dozens of Luxembourg holding companies.          A prime location for tax planning          There are various reasons for choosing Luxembourg : a central position in the European Union, high-quality financial engineering, financial regulations tailored to business, direct access to the country’s institutions, and political stability. But let there be no mistake : the first reasons are taxation and discretion. They are the result of political choices dating back to the time of former Prime Minister, Jean-Claude Juncker (1995-2013), who later became President of the European Commission.         Le Monde   Soutenez une rédaction de 550 journalistes Accédez à tous nos contenus en illimité à partir de 7,99 €/mois pendant 1 an.  S’abonner          Luxembourg has certainly turned its back on its former tax rescripts, these ultra- advantageous arrangements granted to large multinationals, following the revelations on the subject in 2014 by the « LuxLeaks » investigation. But it remains a hotbed of tax planning for companies and wealthy individuals through preferential tax regimes. This encourages, in some cases, abuse and, possibly, fraud.          The scale of the financial centre is such that the Grand Duchy seems, moreover, insufficiently equipped to guarantee effective control over all the flows it handles. Its services seem to be more calibrated to the size of the country than to its offshore activity. The trade register has only 59 employees to enforce the legal obligation to declare the actual beneficiaries of more than 100.000 entities and to carry out an initial control of the declarations. The Financial Sector Supervisory Commission (CSSF) has only 900 employees, even though the financial sector accounts for a quarter of the country’s economy.          Of course, Luxembourg is not the only country to have entered the race for the lowest tax bill. But this is the first time that an investigation has exhaustively documented the phenomenon, through the analysis of the microeconomic fabric of a State.           The many flaws discovered by the OpenLux investigation question the ability of States to effectively monitor their financial ecosystem          This truth operation would not have been possible without a directive voted by the European Union in 2018, which required the creation of public registers of the real owners of companies in all member states. This historic reform came after a decade of financial scandals, culminating in the « Panama papers » in 2016, that revealed the extent of the role played by opaque companies and offshore arrangements in laundering criminal activities, including tax fraud. A decade in which at the same time anti-corruption judges and tax authorities saw their investigations coming up against front companies and front men.               Luxembourg was one of the first to apply the European directive, making its register public in autumn 2019. In a way, it is therefore paying the price of transparency. The many flaws discovered by the OpenLux investigation question the ability of States to effectively monitor their financial ecosystem by guaranteeing the reliability of these registers. For example, almost half of the companies, funds and foundations registered in Luxembourg have no real identifiable beneficiaries to date. However, as the European directive states, « public access to information on the actual recipients allows greater control of information by civil society (…) and helps to preserve confidence in the integrity of commercial transactions and the financial system ».                                            