European Commission boss Juncker admits he’s ‘weakened’ by tax scandal

Jean-Claude Juncker under pressure over his deals as PM of Luxembourg

The arch-federalist EU chief is alleged to have courted tax avoidance deals

He has now admitted he has been ‘weakened’ by the revelations

It emerged his regime agreed deals with Walt Disney and Koch Industries

Jean-Claude Juncker has admitted he has been ‘weakened’ as pressure mounts on him over his alleged role in tax avoidance.

The president of the European Commission spoke out as a senior figure at Amazon claimed he had behaved like a ‘business partner’ – setting up special deals for the retail giant while he was prime minister of Luxembourg.

Bob Comfort, the former head of tax for Amazon, said Mr Juncker had fiercely courted the online firm and had even ‘helped solve problems’ to make it easier for them to base themselves there.

Months after arriving in Luxembourg in 2003, Amazon secured a confidential deal from the local tax office. Two months ago that became the subject of a formal inquiry by the European Commission.

The allegations will add further to the pressure on the arch-federalist EU chief over his alleged role in turning Luxembourg into Europe’s biggest tax haven when he was prime minister.

It emerged earlier this week that his regime had agreed tax deals with film studio Walt Disney and commodities group Koch Industries.

The two companies engaged in complex restructurings and channelled hundreds of millions of dollars in profits between 2009 and 2013 through Luxembourg subsidiaries that enjoyed tax rates of less than 1 per cent.

Speaking to the French newspaper Libération, he admitted he had been ‘weakened’ by the revelations – known as ‘Luxleaks’. He even faced a censure motion in the European Parliament.

‘Subjectively speaking, I have nothing to reproach myself more than others would have to reproach themselves,’ he said.

‘But, objectively speaking, I was weakened because the Luxleaks suggests that I would have participated in schemes which infringe elementary rules of ethics and morality.’

Amazon has been accused of tax dodging in the UK. Last year it paid only £4.2million in UK tax despite sales of £4.3billion.

The latest allegations about Amazon’s links with the government come from an interview Mr Comfort did in the Luxembourg newspaper d’Lëtzebuerger Land.

‘The Luxembourg government presents itself as business partner, and I think it’s an accurate description: it helps to solve problems,’ he said.

Mr Comfort recalled meetings with top civil servants from the finance ministry and Mr Juncker, who was then serving as both prime minister and finance minister.

‘His message was simply: “If you encounter problems which you don’t seem to be able to resolve, please come back and tell me. I’ll try to help”.’

The mounting controversy around Luxembourg’s accommodating approach to multinationals’ tax planning came as George Osborne revealed details of a new ‘diverted profits tax’.

The new tax, also called the ‘Google tax’, was announced in the Autumn Statement last week and the Chancellor has claimed it will raise £1billion in the next five years.

The new measures will target companies shifting profits out of the UK in artificial ways, with a punitive 25 per cent tax rate from April next year.

A Treasury source told the Guardian: ‘HMRC already has a pretty good idea of the companies that use these kind of structures and will be issuing notices to those companies.

‘Companies then have 30 days to dispute the payment but if HMRC believes they are using the structure they would have to pay immediately.

‘Obviously there may be companies that may not be on HMRC’s radar. We would expect them to report to HMRC that they are using these structures. If they don’t, that would be illegal.’

The Treasury expects the tax to hit companies such as Amazon and Google that make billions of pounds from sales to UK customers but book the revenues in companies overseas.

Margaret Hodge, chair of the Commons public accounts committee, said: ‘This is an important symbolic statement but it is really on the margins.

‘What you really need is international agreement and a really, really tough, determined HMRC.’

Mr Juncker has denied any wrongdoing.

Last month, he said: ‘I am not the architect of the Luxembourg model because this model doesn’t exist.’ He insisted that his government did no more than compete hard for inward investment as others did.