The “OpenLux revelations”: Who is to be blamed?

Abstract

The present paper aims to shed some light on the “OpenLux” revelations. In February 2021 the prestigious French journal, “Le Monde”, published the results of an investigation conducted by it and other media into Luxembourg’s beneficial ownership register. This inquiry revealed, inter alia, that more than half of the companies registered in Luxembourg had not declared their beneficial owners on the public register, while others had given contradictory information. Furthermore, it found out that approximately 90% of the companies in the register were owned by non-residents in Luxembourg and that approximately 33% of these companies were participation or holding companies that were used by very wealthy individuals to structure their assets and investments through these companies in Luxembourg, in order to benefit from a favourable tax regime.
This paper argues that while indeed Luxembourg may suffer from an enforcement problem, other issues, non-Luxembourg specific have contributed to the alleged facts in the OpenLux revelations. The author argues that the main problem is definitional in that fundamental concepts, like substance and beneficial ownership, remain hard to be defined and accordingly, easy to be circumvented.

Keywords: tax scandals, OpenLux, substance, beneficial ownership, tax evasion

JEL Classification: K34, K42