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Luxembourg is a small (2,586 km²) country which borders Germany, France and Belgium. It is a Grand Duchy meaning it has a ruling Grand Duke/Duchess instead of a king or queen. Dukes were in medieval times serving under kings, and so was Luxembourg when in 1815 it became a Grand Duchy under the King of the Netherlands (who inherited the title of Grand Duke of Luxembourg resulting in a personal union between the two countries).

The Netherlands followed primogeniture (system of inheritance where the firstborn child inherits the throne) with a preference for male heirs. Luxembourg, on the other hand, followed Salic law (male-only inheritance). So, in 1890 when King William III of the Netherlands died in 1890 and his daughter took the crown, Luxembourg gave their throne to Adolphe of Nassau-Weilburg instead which caused the personal union to end.

Wealth

Luxembourg is known for its high GDP per capita (around €128,131 as of 2024). It historically had strict bank secrecy where Luxembourgish banks were obligated to keep financial information private, so it attracted a bunch of foreign capital and had certain laws that allowed for legal loopholes to get out of paying taxes.

Luxembourg Leaks

Luxembourg Leaks, shortened as LuxLeaks, was a scandal in 2014 where giant companies like Apple, IKEA and Pepsi were exposed for using Luxembourg's tax system to avoid billions in tax dollars worldwide.

More than 28,000 pages of documents originating from the company PricewaterhouseCoopers (accounting firm), exposed by the journalist organization International Consortium of Investigative Journalists (ICIJ) showed that over 340 companies where some even paid less than 1% in profit tax. Amazon, for example, routed its European profits through Luxembourg where it got away with paying as little as 0.5% taxes due to a loophole. Keep in mind that 0.5% of profits for Amazon was still a bunch of money, all being paid to Luxembourg.

Having to pay miniscule amount of tax meant corporations set up legal headquarters, offices and other things in Luxembourg which gave thousands jobs and gave Luxembourg more clout in the corporate world.

The leaks got a reaction out of the EU and prompted them to launch investigations where Luxembourg was forced to change this little-to-no tax policy and stop profit shifting (moving profits from high-tax to low tax countries)