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More evidence in the case against Luxembourg

Luxembourg sometimes resembles a criminal enterprise with a country attached.The Grand Duchy’s appetite for other nations’ tax revenues ranges from its unusually low petrol taxes, which siphon commuters from neighbouring Belgium, France, and Germany, to its unusually generous treatment of multinational corporations.These predations are distasteful, but they are more or less legal, at least for now. Less justifiable is Luxembourg’s role as a centre for money-laundering and outright tax fraud.As Gabriel Zucman of the University of California-Berkeley has documented, there is a gap worth roughly trillion (5 per cent) between the world’s financial assets and its financial liabilities. If that gap were randomly distributed across countries, it could be attributed to errors at national statistical agencies rather than anything sinister.However, the discrepancy is concentrated in a handful of small countries known independently as places favoured by tax cheats, including Luxembourg. The total value of foreign investments in Luxembourg, according to the local authorities, is worth trillions of euros more than what the rest of the world’s national statistical agencies claim their citizens own in Luxembourg. The most straightforward explanation is that many foreigners who own assets in Luxembourg are underreporting these holdings to their governments.

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Luxembourg sometimes resembles a criminal enterprise with a country attached.

The Grand...

Matthew C Klein
I write about the economy and financial markets for Bloomberg View. Before that I wrote for The Economist. I have worked at the world’s largest hedge fund and read every FOMC transcript since May, 1987

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