In 2014, the pair had leaked classified documents which were reviewed by the International Consortium of Investigative Journalists. These contained 28,000 pages of records from the Big Four firm which referred to “tax rulings” from the period 2002-2010.
These tax rulings were euphemisms for tax avoidance schemes agreed between Luxembourg and some 300 multinational companies, including Apple, Ikea, Walt Disney, PepsiCo and Microsoft’s Skype whereby they were able to lower their tax bills to as little as 1% through sweetheart deals and by funneling money through Luxembourg. A recent European parliament study has estimated that corporate income tax avoidance costs EU countries between €50-70bn (£43bn-£60bn) every year.
The fact that European Commission president Jean-Claude Juncker was prime minister of Luxembourg at the time the deals were made has also led to controversy. Juncker, however, has denied all knowledge of such arrangements, despite evidence which would suggest to the contrary.
Deltour was originally sentenced to a 12-month suspended prison sentence, with a €1,500 fine, while Halet received a nine-month suspended jail term with a fine of €1,000. However, on 15 March 2017, Luxembourg’s Court of Appeal ruled that Deltour’s suspended sentence should be reduced to six months, and that Halet’s should be cancelled completely.
Appeal judge Michel Reiffers announced that, while Deltour was to be acquitted for violation of professional secrecy and violation of trade secrets, the court was upholding his convictions for theft offenses, fraudulent maintenance in a database, and laundering of acquired data. In a symbolic gesture, both Deltour and Halet’s fines were left unchanged.
How times have changed, although perhaps not in Luxembourg.
A generation ago, the Three Wise Monkeys - “Hear no evil, See no evil, Speak no evil” - were paraded as paragons of good conduct: this was how decent people operated. We didn’t rat on others.
Over the past 20 years, approbation for this approach has been changed to condemnation. Those whose ears, eyes and mouths are closed to hearing, seeing, and speaking out against the criminal or unacceptable conduct of others are now simply regarded as being as bad as those they protect.
We now call the one who hears, sees and then speaks out about the evil of others a whistleblower. Research repeatedly concludes that whistleblowers uncover and bring to light more criminal and unacceptable commercial and financial conduct than all law enforcement, regulators, auditors and company management combined. There is no doubt that the work of whistleblowers is in the public interest.
The problem with whistleblowers, however, is that they usually take significant personal risk in bringing misconduct to light, mainly because they are putting the public interest before their own. This is because their own actions in blowing the whistle are nearly always directed against parties who have a degree of control over them, for example employers, or local and central government. It is for this reason that in both the UK and globally, nearly every country concerned with fair play and transparency has enacted legislation to protect whistleblowers.
Luxembourg is one of the few remaining jurisdictions where fair play and transparency remain unpopular, possibly because the USP of the country, in the absence of anything more productive, is the provision of a secretive tax haven for those with reasons and funds to take advantage.
It is a sad state of affairs when the position of whistleblowers remains so precarious and unprotected in a European country that they are vulnerable to complaint by their employer (PwC) and to prosecution - by the very company and sovereign state whose unacceptable conduct they have exposed. This is unfairness, protectionism and a conflict of interest of almost mafioso proportions.
It is interesting to note that, in direct opposition to the views and approach of PwC and the Luxembourg judicial system, the rest of the western world has applauded the conduct of Antoine Deltour – he was awarded the European Citizen’s Prize in 2015 and was nominated for the Sakharov prize the same year. Furthermore, because of the extent to which the leaks led to improved tax legislation in many jurisdictions, he was recognised as the person of the Year 2015 by Tax Notes.
Conversely, Luxembourg and PwC have been widely criticised. In the UK, the chairwoman of the Public Accounts Committee, Margaret Hodge, called the practice of tax rulings a “mass marketed tax avoidance scheme". Furthermore, the extent of new tax legislation around Europe, following on from these leaks, suggests widescale unhappiness with this, one of the last pockets of state and Big Four-sponsored tax avoidance.
The appeal decision of 15 March 2017 will, sadly, appear to many as another example of a parochial state using its justice system to give a beating to individuals who have acted for the public good against the self-serving interests of that same state. Even though the sentences have been reduced, it is hard to see the appeal decision as anything other than a regressive step in the global fight against financial impropriety and tax manipulation.
Jeffrey Davidson, managing director, Honeycomb Forensic Accounting. www.honeycombpsg.com