EU leaders committed to seek a broad global agreement to share data on foreign depositors to stymie tax-shirking companies and individuals at a summit in Brussels yesterday (22 May). Austria lifted its opposition in principle but support could fade should efforts to strike a similar deal with Switzerland fail.
The summit reached a compromise deal on the savings directive after Austria dropped objections to an exchange of bank information affecting EU deposits by the end of the year.
"It's a bad day for tax cheats," Austrian Chancellor Werner Faymann told reporters after the summit. "I believe we will manage the exchange of data by the end of the year," he said, adding later that although he was watching negotiations on a similar deal with Switzerland, Austria was in "full agreement".
The summit conclusions committed leaders to seek ambitious information-sharing proposals on an EU-wide and global basis, pushed originally by the United Kingdom, Germany, France, Spain and Italy – nations that are testing such a system and want to launch it before year-end.
The initiative is modelled closely on the US Fair and Accurate Credit Transactions Act, which requires American taxpayers to report their foreign financial interests, and has galvanised EU countries to act.
The issue has taken centre stage as EU nations deal with the effects of austerity and seek to maximise tax revenue.
"At a time when governments are trying to reduce their deficits, better fetch the contribution of those who do not pay taxes rather than go and ask payments to those who are already paying. It applies to individuals, it also applies to companies,” French President François Hollande said after the summit.
Referring to tax-optimisation by large companies, Hollande said it was “crucial” to fight against it. “it is very important that this struggle is conducted against so-called tax optimisation which is nothing other than the pursuit of zero taxation for a number of large groups."
Cameron claims ‘bit of a breakthrough’
"There is a real chance of seeing the sort of international action that we need to fix this problem," he said after the summit. "You can't do it on your own, you have to have that international action and that is why I think today has been a bit of a breakthrough."
German Chancellor Angela Merkel described the EU deal as an enormous step. "There is no doubt that the exchange of information about all kinds of income will be the rule for the future," she said.
Savings directive compromise agreed
Austria and Luxembourg have played for time on implementing the savings directive, with Luxembourg saying it would only implement the directive when similar agreements had been concluded between Switzerland and the EU. Switzerland is the world's biggest offshore centre, with €1.5 trillion in offshore assets.
Adopting the directive is politically sensitive in Austria, where centre-right Finance Minister Maria Fekter opposes the transparency requirements while the Social-Democrat chancellor, Werner Faymann, has disagreed with her.
Fekter’s hard line and talk of defending the interests of Austrian deposit-holders are seen as popular gestures ahead of a September general election.
The Commission estimates that tax evasion and fraud cost member states about €1 trillion a year.