Deltour in the dock

THE identity of the hacker who sucked 2.6 terabytes of data out of Mossack Fonseca, a law firm, to bring the world the “Panama papers” remains a mystery. Not so the source of the previous biggest financial leak: on April 26th Antoine Deltour, a soft-spoken, bespectacled former auditor with PwC, went on trial in Luxembourg for his role in the “LuxLeaks” affair.

Mr Deltour does not deny being behind the exposure of cosy tax deals between the Grand Duchy and 340 of the accounting firm’s corporate clients, including Pepsi and FedEx. He passed 28,000 pages of documents to Edouard Perrin, a French journalist, in 2012. Many of these were later put online by the International Consortium of Investigative Journalists. PwC identified the former employee as the source of the leak and complained to prosecutors, who charged him with theft, violating secrecy laws and illegally accessing a database.

If convicted, Mr Deltour faces up to ten years in prison and a hefty fine. In the dock with him are another former PwC man, Raphaël Halet (in connection with a separate, smaller leak), and Mr Perrin, who is charged as an accomplice. The trial is expected to last until May 4th.

Luxembourg’s lawyers and moneymen mostly take the view that the case against Mr Deltour is straightforward: he stole data to reveal tax arrangements that were legal, and should be punished for his crime.

Mr Deltour’s lawyers argue that the action was justified because it was in the wider European public interest. Neighbouring countries were being stripped of tax revenue by the deals, unaware of their cushy terms (profits routed to Luxembourg incurred tax of as little as 1-2%). Not all tax deals of this kind are legal: the European Commission argues that some fall foul of European Union (EU) state-aid rules.

The EU’s competition commissioner, Margrethe Vestager, has praised Mr Deltour’s actions, as has France’s finance minister, Michel Sapin. The European Parliament has awarded him a prize. Even in Luxembourg, people have turned in droves against the questionable tax and other financial practices through which the tiny country grew rich: three-quarters of those voting this week in an online poll by Le Quotidien, a local newspaper, disapproved of the criminal charges. Regardless, overt support for corporate whistleblowers remains muted. Only a few dozen activists turned up to cheer Mr Deltour as he entered court; some waved “Justice Fiscale” placards, others blindfolded themselves with EU flags (something to do with hidden tax havens, apparently).

As part of their public-interest defence, Mr Deltour’s lawyers will be sure to highlight the policy impact that LuxLeaks has had. By drawing attention to exploitable gaps in international tax rules, it sharpened the debate on reform. The OECD is overseeing the closure of numerous loopholes as part of its “Base Erosion and Profit Shifting” proposals. Large companies are steeling themselves to report profits and taxes paid on a country-by-country basis. EU governments have agreed to share with each other details of any special tax deals they strike with companies. “We’ve seen more tax progress in Europe in the past 18 months than in the previous decade,” says Carl Dolan of Transparency International, a lobby group.

However, the LuxLeaks case has exposed weaknesses in legal protections for whistleblowers. The relevant law in Luxembourg, passed in 2011, is one of the strongest in Europe, but too narrow: it covers only blatant criminality, not behaviour that is legal (or in a legal grey area) but nevertheless damaging to the public interest. The justice minister, Félix Braz, says it is “not a law that allows everyone to denounce everything and anything according to his own moral values”. Still, the government is thinking of proposing changes. Campaigners want stronger EU-wide protections for leakers.

These would come too late for Mr Deltour. He is said to be “worried” about the prospect of spending time behind bars, but his lawyers say he has no regrets.