LUXEMBOURG IS TRYING to throw two French whistleblowers and a journalist in prison for their role in the “LuxLeaks” exposé that revealed the tiny country’s outsized role in enabling corporate tax avoidance.

The trial of Antoine Deltour and Raphael Halet, two former employees of the international accounting firm PricewaterhouseCoopers, and journalist Edouard Perrin began Tuesday.

Deltour and Halet were charged in connection with theft of PwC documents. Perrin is charged as an accomplice for steering Halet toward documents that he considered of particular interest.

Perrin, a reporter with Premières Lignes Television in Paris, produced the first LuxLeaks reporting. PwC documents were later obtained by the International Consortium of Investigative Journalists and, together with records from other accounting giants, formed the basis for the 2014 “LuxLeaks” series involving over 80 journalists across the world.

Among the many prominent supporters of the defendants, France’s Finance Minister Michel Sapin told the French parliament Tuesday that Deltour was “defending the general interest” and that he “would like to offer him all our solidarity.” Almost 175,000 people have signed a petition in support of Deltour.

The European Federation of Journalists has demanded that Luxembourg drop the charges against Perrin. EFJ general secretary Ricardo Gutierrez called Perrin’s prosecution “shameful,” saying that Luxembourg “is going after a journalist who has acted entirely in the public interest.” Reporters Without Borders criticized Luxembourg for being “more concerned about deterring investigative journalism than protecting the public’s right to information.”

So why has Luxembourg’s behavior been so ferocious?

The answer can be found, appropriately enough, in a publication of PricewaterhouseCoopers itself.

According to PwC’s January 25, 2016 “Global Regulatory Briefing,” its international client base now faces “new far reaching developments” on matters including “corporate governance and tax.” Among these are “various initiatives aiming to adapt the EU’s tax laws in the aftermath of Luxleaks” and “the release of the OCED/G20 Base Erosion and Profits Shifting (BEPS) Project.”

Here’s what that means for Luxembourg, translated into English:

The LuxLeaks series exposed Luxembourg as a “magical fairyland” for multinational corporations trying to avoid taxes, and now other countries are trying to shut it down.

The government of Luxembourg made sweetheart deals with over 340 multinational corporations that enabled the companies to claim much of their profits had been generated by Luxembourg subsidiaries, which were then taxed at rates as low as 1 percent.

Among the well-known beneficiaries of Luxembourg’s special arrangements were Pepsi, FedEx, IKEA, AIG, Walt Disney, the Carlyle Group, Deutsche Bank, JP Morgan Chase, Procter & Gamble and, via its one-time ownership of Skype, eBay. [Disclosure: Pierre Omidyar, the founder of eBay and longtime chairman of its board of directors, founded The Intercept’s parent company First Look Media.]

Tax avoidance by U.S.-based multinational corporations alone has been estimated to cost governments approximately $130 billion each year, and tax havens such as Luxembourg are crucial to this process.

They take a slice of the dodged taxes that’s small from the perspective of multinationals but enormous from the perspective of the countries themselves. In 1970, finance accounted for 2 percent of the Luxembourg economy; today it’s over 40 percent.

That’s why Luxembourg is behaving like this: LuxLeaks was a mortal threat to its current cushy way of life. The Organization of Economic Cooperation and Development, representing 34 countries with the world’s preponderance of economic power, had already begun its “Base Erosion and Profits Shifting” project in 2012 to minimize the most egregious forms of corporate tax avoidance. However, the LuxLeaks revelations generated significant, additional momentum for the OECD to go further and faster.

What will happen in the end still remains to be seen. However, according to that PwC Global Regulatory Briefing, Europe “appears intent” on creating an “anti-tax avoidance package” largely “in line with the OECD’s BEPS recommendations.”  There will even, PwC says, be “mandatory consolidation across the EU according to the CCTB and an apportionment based on certain formulas to individual Member States” — a lot of gobbledygook which means Europe may move to a “formulary apportionment” corporate tax system which would make most current tax avoidance schemes there pointless. This in turn would force a whole lot of lawyers, bankers and accountants in Luxembourg to start looking for honest work.


Top photo: People hold a banner reading “thank you Antoine” as they demonstrate outside the courthouse in Luxembourg, on April 26, 2016, in support of whistle-blower Antoine Deltour.