The European Commission (EC) is starting legal actions against Luxembourg on Thursday. The European body charges the Luxembourg government with failure to address money laundering and tax avoidance according to the bloc’s rules.
In May 2018, the European Union implemented a new series of
laws to supervise financial assets owned by politicians and company owners in a
bid to put an end to money laundering. However, Luxembourg is still among
several European countries that are not fully implementing the new rules, the
EC stated.
Separately, the EU’s executive division required Luxembourg to change a law that permits businesses to reduce their tax burden beyond what is allowed in the EU.
The EC’s legal actions may lead to fines if the Grand Duchy
and other states do not apply the common rules.
Data from the International Monetary Fund showed last year
that Luxembourg hosted as much foreign direct investment (FDI) as the US and
more than China, at about $4 trillion.
A large chunk of those funds relates to shell companies
established by multinationals with no real activities in the country. The IMF
said that these channels are created mainly for favourable tax treatment.
Besides accusations related to tax avoidance rules, Luxembourg
is one in over a dozen other EU member states that have not adopted the new
money-laundering rules.