An Offshore Financial Centre Inside Europe: Luxembourg, Taxation and European Economic Community (1960s–1970s)

This article examines how Luxembourg developed as an offshore financial centre within the European Economic Community between the 1960s and the 1980s. Focusing on the holding company regime established in 1929, it explores the tension between the Grand Duchy's commitment to European integration and its defence of fiscal sovereignty. Drawing on Luxembourgish, French and European institutional archives, alongside contemporary press and legal literature, it reconstructs the negotiations through which this regime was contested, adapted and preserved. The analysis traces early discussions of taxation within the European Economic Community, the challenges posed by the 1966 Segré report and the emergence of tax evasion as a European public problem in 1973 and 1974. Holding companies became central to debates about capital movements, fiscal competition and multinational enterprises, prompting proposals for withholding taxes, information exchange and administrative cooperation. Meanwhile, Luxembourg extended the advantages of its holding regime to investment funds and Eurobond issues, consolidating its financial sector before the crisis of its steel industry. The article demonstrates how Luxembourg defended these arrangements through diplomatic obstruction, shifting alliances with other member states, and the mobilization of private expertise. Bankers and business lawyers participated in European negotiations, blurring the boundaries between public representation and private financial interests. Arguments that restrictive measures would divert capital to tax havens outside the Community further weakened reform efforts. Despite limited advances in administrative cooperation, initiatives targeting holding companies lost momentum from the second half of the 1970s. By connecting the history of offshore finance with European integration, the article challenges explanations of Luxembourg's financial rise as an accidental outcome of external developments or a reaction to deindustrialization. It also demonstrates that European efforts to address tax evasion long predated the financial crisis of 2008, revealing the tensions between national fiscal strategies and the construction of a common European economic space.