Leandra Lederman (Indiana-Maurer; Google Scholar), The Untold Tale of a Tax Rulings Haven, 29 Stan. J.L. Bus. & Fin. 1 (2024)
When the International Consortium of Investigative Journalists (ICIJ) broke the “LuxLeaks” scandal, it revealed hundreds of billions of dollars in secret deals granted by the small country of Luxembourg to large multinational companies such as Apple, Disney, and Pepsi. These sweetheart deals, in the form of Luxembourg tax rulings, allowed many name-brand companies to dodge huge amounts of tax that would otherwise be due to the United States or other countries. Surprisingly, a tiny tax agency had produced thousands of tax rulings in the course of a few years.
This Article makes three major contributions. First, it explores where Luxembourg’s informal tax-rulings process came from and how it became so prolific. It draws on government documents and news stories to tell the story of the importation and dramatic growth of Luxembourg’s rulings process, with players that include Dutch tax advisers, a man nicknamed “Monsieur Ruling,” and Big Four accounting firms.
Second, it makes the original argument that three factors were critical in attracting so many large companies to seek Luxembourg tax deals: (1) amenability of the tax administration, (2) trust in the Luxembourg government, and (3) secrecy. The Article shows that once these factors changed, Luxembourg’s rulings volume plummeted. The three factors of amenability, trust, and secrecy also reappear in the recent “LuxLetters” scandal, involving an alleged new procedure for under-the-radar rulings.
Third, the Article examines the aftermath of LuxLeaks. It examines the timing of the codification of Luxembourg’s new rulings process in relation to the ICIJ investigation. And it teases apart legal changes that may have contributed to the precipitous drop in Luxembourg tax rulings. It also explores whether the funds previously flowing into Luxembourg arrangements simply moved elsewhere in the world.
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