The EU president came under fire from MEPs over his knowledge about tax arrangements made in Luxembourg which effectively allowed multinationals to reduce their tax bills by using tax avoidance schemes as MEPs questioned tax policy during his tenure as finance minister in the 1990s.

At a committee hearing into tax avoidance, tax evasion and the Panama Papers at the European parliament on Tuesday, chaired by German MEP Werner Langen, Juncker was probed about his role and involvement in the tax deals, which saw over 300 international companies including Pepsi, Ikea and Abbott Laboratories involved in deals to reduce their tax liability, during his time as finance minister and then prime minister of Luxembourg.

Juncker refused to be drawn on his involvement in any of the tax deals agreed with multinationals as well as Luxembourg’s failure to comply with the Tax Savings Directive. When this Directive was introduced in 1997, Luxembourg agreed an exemption, which meant it could opt out and instead charge a 10% withholding tax on savings deposited in its banking system.

He told MEPs: ‘It is very difficult to explain why Luxembourg supported a co-existence model and did not want to remove secrecy from its banking system. On the Tax Savings Directive, I knew about that, I headed up Ecofin [Committee] from 1997 and we were examining the taxation of savings but at the time we did not know how many people were saving money in Luxembourg.’

Juncker rejected claims that he had knowledge of tax deals with multinationals when he was in government in Luxembourg, as prime minister, finances minister and also treasury minister from 1989 to 2014.

He said: ‘You are talking about events in the past, I am afraid that I cannot help you. I never said that I never talked to anyone about tax issues, but I was not involved in any particular arrangements with individual companies. I never discussed fiscal measures with any companies. It is a clear principle in Luxembourg. Tax rulings are negotiated with the tax authorities in Luxembourg, not with ministers.’

When pressed on Luxembourg’s refusal to sign up to the Tax Savings Directive, a measure to stop EU nationals putting money into secretive banking centres and therefore avoiding national taxes, he said: ‘The world was very different then and Luxembourg, Belgium and Austria wanted a withholding tax [of 10%] so long as certain conditions were met before countries could move to a different regime, and we needed countries like Andorra and the US to agree to automatic exchange of [tax] information but they did not.’

His refusal to acknowledge any involvement with the hundreds of tax deals with multinationals using Luxembourg as a tax base raised some strong criticism from MEPs, with one MEP questioning how he had turned ‘from Saul to Paul on the road to Damascus’, in terms of his current acceptance of the principle of tax competition, saying that ‘people want a clear statement on what you did in the past’.

‘I understand that you would like to know more about the background but I don’t measure my credibility on that basis,’ Juncker said. ‘We need to measure credibility of the Commission based on what the Commission has achieved and we have announced 12 new tax proposals since 2014.’

There was also concern that the Commission had failed to react to knowledge of tax evasion before the leaking of the Panama Papers last year, with MEPs asking whether Juncker knew about the problems in 2013 and failed to take any action. He rejected this, stating that the Commission had acted swiftly after the LuxLeaks incident.

He was pressed on his stance on whistleblowers, with criticism of the European Commission’s failure to protect anyone who came forward with information about state level endorsement of tax evasion. This is an issue which is being reviewed, he said, explaining that ‘a committee is working on a proposal to introduce a law to protect whistleblowers – this is being done in the next few months’.

The hearing coincided with the publication of a report into Luxembourg’s tax policy by the Greens/European Free Alliance of MEPs in the European parliament focusing on how Luxembourg attempted between 2003 and 2005 to block the introduction of new legislation to fight tax evasion: the Savings Tax Directive, which would automatically send tax information among member states.  At the time, Luxembourg obtained a concession so instead of automatically exchanging information, it was authorised to levy a withholding tax deducted from interest earned in Luxembourg, partially passed on to the EU country of residence.

The European Parliament Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion (PANA) hearing with Jean-Claude Juncker is available on webcast here

The Green/European Free Alliance report is here