Luxembourg: Post-Truth In Tax Matters: Considerations Regarding A Recent Eurodad Report

Last Updated: 19 December 2018
Article by Keith O'Donnell and Oliver R. Hoor
Most Read Contributor in Luxembourg, December 2018

On 7 December 2016, the European Network on Debt and Development (Eurodad) released a report entitled "Survival of the Richest: Europe's role in supporting an unjust global tax system 2016" which was produced by NGOs in countries across Europe. At the core of the report is the accusation that the number of Advance Pricing Agreements (APAs), referred to as secret "sweetheart deals" in the report, significantly increased over the last years.

The key messages of the report have been much-cited in newspapers in Luxembourg and across the globe. Unfortunately, the journalists covering the topic merely relied on the information provided in the executive summary of the report without conducting a critical review of its content. Otherwise, the misrepresentations in the report would have been detected and pointed out.

Below we summarise few examples of these misrepresentations:

#1 Classifying APAs as secret "sweetheart deals"

An APA is an agreement between a taxpayer and a tax authority on the application of an appropriate transfer pricing methodology in regard to a specific intra-group transaction, confirming the arm's length nature of a transfer price (i.e. the price for goods or services transferred between members of the same group). The latter has to be substantiated in a transfer pricing study that is consistent with the OECD Transfer Pricing Guidelines.

The report denounces APAs as secret "sweetheart deals" which is wrong in many respects. First, an APA only confirms the agreement of the tax authorities with the transfer pricing methodology applied by a taxpayer. As such, APAs do not entail any particular benefit to taxpayers.

Second, APAs are not secret at all since they are exchangeable with the tax authorities of all EU and OECD Member States. Hence, there is full transparency with all the tax authorities that are concerned. Starting from the position that not publishing something involves secrecy is a point of view but it should not be presented as objective in any way.

Third, the report impressively shows how statistics can be used to disguise or misrepresent information. According to the report the number of APAs in the EU has soared from 547 in 2013, to 972 in 2014 and it finally reached 1,444 by the end of 2015. The authors of the report then compute a sharp increase of over 160 per cent between 2013 and 2015 (and an increase of almost 50 per cent from 2014 to 2015). The report further points out that the most dramatic increases have occurred in Belgium and Luxembourg where the amount of APAs "skyrocketed" increasing by 248 per cent and 50 per cent respectively in just one year (from 2014 to 2015).

The truth is that the report presents aggregated figures (adding the number of new rulings granted in a given year to the number of previously existing rulings) instead of APAs on a year-by-year basis. Hence, it is only natural that the number of rulings significantly increases over time as APAs usually remain valid for a number of years.

Last but not least, the report fails to explain what is wrong about taxpayers receiving up front confirmation of the transfer pricing policies that they adopt. This has been recognised as a positive development as it allows tax authorities in Europe and around the world to verify the TP policies up front. Even the EU Commission acknowledges the positive effect of APAs on removing legal uncertainty from transfer pricing and supports the continued use of this instrument by EU Member States.

#2 Red cards for failing to support "public" Country-by-Country Reporting (CbCR)

The report rates countries "red" which are not in favor of public CbCR. However, this is reflective of the mindset of the report's authors and lacks any sense of objectivity.

As part of its Base Erosion and Profit Shifting (BEPS) Project, the OECD developed a template for multinational enterprises (MNEs) to report annually and for each tax jurisdiction in which they do business certain information on its group companies. According to the OECD, CbCR should be automatically exchanged with all tax jurisdictions involved. Thus, all tax authorities that are concerned with the taxation of a MNE have access to this information.

The report advocates the public disclosure of CbCR information. Nevertheless, the disclosure of this commercially sensitive information is extremely problematic for MNEs as it also discloses their business strategy. Therefore, the OECD is strongly opposing against the idea of publishing CbCR.

However, it is not even a question whether one is in favor of public disclosure of CbCR or not. Notably, the French Constitutional Court (Conseil constitutionnel) held on 8 December 2016 (No. 2016-741 DC) that the public country-by-country reporting rules introduced in French law on 8 November 2016 are not compatible with the French constitution and repealed the relevant Article from French tax law. Thus, not only may the French tax authorities not publish CbCR but it may even not be possible to share CbCR with jurisdictions that would adopt "public" CbCR. These constitutional concerns should exist in many jurisdictions and render "public" CbCR non-practicable.

#3 "Very problematic" tax treaties with developing countries

The report states that European governments continue to sign "very problematic" tax treaties with developing countries as they impose restrictions on tax systems in developing countries. However, this is what tax treaties do, they allocate taxing rights between the Contracting States and determine how double taxation is avoided. This involves a restriction of the taxing rights of the Contracting States (in general, both Contracting States negotiate the same allocation of taxing rights).

The primary purpose of tax treaties is the elimination of double taxation as an obstacle to international trade and investment. Tax treaties promote the development of economic relations between countries and foster cross-border business activities.

The description of tax treaties as "very problematic" is entirely subjective. These tax treaties are negotiated between Sovereign states with their eyes open and reflect the balance of interests of both states and a desire to improve trade. A developing country can easily revoke a treaty if the terms are harmful to its best interest.

Most development specialists agree, however, that trade is the most important means for developing countries to improve their status, so encouraging trade by double tax treaties should be encouraged not discouraged.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions