During a recent interview with Tax Analysts, Edouard Perrin began the discussion of his participation in the LuxLeaks investigation by asking why Tax Notes International chose Antoine Deltour as its person of the year for 2015.
"Your readers are mostly in the [tax] industry, right?" the reporter behind the LuxLeaks scandal asked as he sat down for lunch near the Ann Arbor campus of the University of Michigan, where he is spending an academic year as a Knight-Wallace fellow. "So, in all candor, your publication is going to be read by the very people who constructed the schemes?" Perrin asked. "All things considered, it's like putting Edward Snowden on the cover of the [National Security Agency] newsletter."
Perrin talked to Tax Analysts almost a year to the day after the International Consortium of Investigative Journalists (ICIJ) released leaked copies of documents regarding negotiations PricewaterhouseCoopers LLP held with Luxembourg on behalf of taxpayers. In all, the ICIJ released 548 tax documents regarding more than 350 companies in what has become known as the LuxLeaks scandal.
Perrin worked with the ICIJ to analyze and publicize the documents that revealed the preferential tax treatment multinationals received from Luxembourg. He received the documents from Deltour, then a junior auditor with PwC in Luxembourg. In April Perrin was charged in Luxembourg as an accomplice to theft for his role in the scandal. He made clear that the criminal charges against him prevent him from discussing how he obtained the documents from Deltour. "I am not going to delve into details, but what can be said is that he did not contact me," Perrin said. "I found him."
Perrin also said he wanted to clarify that he is not permanently in Michigan, where he is studying the use of cooperative journalism to exploit massive data leaks by whistleblowers, to avoid extradition to Luxembourg. "I'm here because I got invited," he said when asked why he had taken the fellowship and moved his family to Michigan. "My friends would tell me, 'Now you are a refugee in the U.S.,' and I would joke about it. But then I started to realize that the joke had a life of its own and people were contacting me and asking me [if I was really escaping]. . . . I was awarded the fellowship two months before I was indicted, so it had nothing to do with that."
Moving Beyond LuxLeaks
Perrin said he and his family will return to France once his fellowship ends. Asked whether the tax investigation was simply an interesting story he pursued or something he would continue to focus on when he returns to France, Perrin reiterated that he is not a financial reporter or tax specialist. "This stuff is very, very arcane." Perrin said he learned a lot about tax topics while working on his documentaries, but that those efforts were really more for his projects than an end in themselves.
However, Perrin said he expects to continue working on LuxLeaks-related topics for the next few years. "I'm not done because, first of all, I keep receiving interview requests about this," he said. "Second, I am not just dropping this. Third, I've got the legal procedure that's still hanging out there, and I need to keep myself updated about what's going on." He added that he would be willing to work with additional tax leaks and would be happy to hear from anyone with information to publicize.
LuxLeaks Started With Individuals
The LuxLeaks project grew out of two well-received documentaries Perrin produced that highlighted the beneficial tax rulings Luxembourg issued to various multinational corporations. The documentaries appeared on French television in 2012 and 2013. After they aired, Perrin said the ICIJ, which had the same documents, asked for his help.
Perrin said he began the investigation that led to the LuxLeaks revelations in 2011 when he was assigned to report on high-income individuals using tax havens. He said his first inclination was to don a hidden camera and head to Geneva to set up some personal accounts there. "Everybody did this before and, at the time, I didn't really think it would be anything new," Perrin said. He then began to look at base erosion and profit-shifting reports being produced by nongovernmental organizations, primarily in developing countries that were being looted by multinationals avoiding taxes, and thought, "Well, maybe I should dig a bit more."
People more familiar with the topic told Perrin, "You don't have to look far away to investigate this problem; maybe you should look inside the European Union -- mainly Luxembourg or the Netherlands." Perrin said those people told him there was publicly available information about multinationals' direct investment in Europe that would allow him to see exactly what was happening with their taxes. "I was specifically told to be more curious about Luxembourg, so that's what I did," he said.
When Perrin began looking into tax avoidance, Europe was in the throes of a major financial crisis. The G-8 and G-20 had said Europe was broke and needed to change the rules governing its financial systems. Because of the crisis, Perrin said, Europeans were more receptive to stories of major multinationals avoiding taxes. "I did not bring this news to the front. I amplified the music that was in their air, and the music was, first of all, that the public coffers were completely depleted because of the crisis," he said. "Liabilities and responsibilities of much of the actors at the time had not been acknowledged, and everybody was paying for it."
Perrin said he used comparisons to show how much money was being moved without any taxes being paid on it. For example, he learned that GlaxoSmithKline PLC had a loan of more than €7 billion going from Luxembourg to the United Kingdom to avoid taxes -- the equivalent of the budget of France's justice ministry for an entire year.
Fighting the Indictment
Perrin said he plans to be in court to fight the charges against him. He said he's already responded to a summons from the investigative magistrate in Luxembourg to formally receive the indictment and be interrogated. "I am not happy, but I am totally ready to go to court in Luxembourg and to have a say in what happens because that is going to be interesting," he said.
Perrin said he's confident that if his case goes to trial, he'll win. "I am not going to brag because these are criminal indictments and you are talking about prison terms and fines," he said. "But in the long haul, how I think it will turn out if this goes all the way to appeal is that it will go to the European Court of Human Rights and we are going to win because there is massive public interest."
Perrin said that in the end, he's convinced his efforts have been in the public interest. He said his attitude toward LuxLeaks is similar to that espoused by Ben Bradlee as editor of The Washington Post during the Watergate scandal: He tried to report the facts fairly and in good conscience and didn't worry about the consequences. He said his goal was to help the public understand the role secret tax rulings play in tax avoidance in the EU. "I have nothing against Luxembourg," he said. "The issue is how our system is organized."
Tax Isn't a Bad Word
Perrin believes a well-run tax system is critical to a well-run society, saying he doesn't think tax is a bad word. He said he thinks taxes are being viewed as more of a burden than as a shared resource, adding that he tends to see them "as the first step to civilization." Perrin said that while working on his documentaries, he read the writings of a bishop in Marseilles near the end of the Roman Empire. The bishop described class conflict stemming from the patricians not paying taxes to the empire. "Nobody was paying the costs of the empire -- the army, the infrastructure, everything," he said. "It is very interesting because it has a lot of parallels to what we are seeing today. I am not saying we are living in an empire, but if you look at the global western civilizations, the corporations are making a lot of money and not paying their share of the taxes."
Perrin pointed out that he doesn't oppose countries competing against each other to provide the most tax-friendly environment for business. "I am not against competition," he said. "I am against fake competition."
BEPS Not Transparent Enough
Perrin said he has been following the OECD's BEPS project for a long time because the first person he interviewed for his documentaries was Pascal Saint-Amans, director of the OECD's Centre for Tax Policy and Administration. "I went to him in the beginning and he was telling me that there were some issues that could be addressed, but that overall, the system was fine," he said. "But over the months I could see how he was changing, saying not only that some things had to be amended, but that the whole structure had to be changed. It was interesting to see himself shift with the whole mission of the BEPS program."
However, Perrin finds the BEPS action 5 provisions regarding the automatic exchange of information "totally insufficient" because they would prohibit publication of the names of the taxpayers receiving cross-border tax rulings. Article 5 provides that the country exchanging the information and its taxpayers have a legal right to expect that the information remains confidential. Thus, the receiving country must have a legal framework to protect the exchanged information, which may not be used for anything other than tax purposes.
"Did anyone achieve any real progress on this?" Perrin asked. "In awareness of the problem, maybe. In the solution to this problem, no. Because it did not go far enough."
J.P. Finet is a legal reporter with Tax Analysts.