Austria isolated on banking secrecy


Finance ministers meeting in Dublin have pledged greater information-sharing to counter tax evasion and isolated Austria for its continuing refusal to share information on bank deposits. The issue will be on the agenda of a European summit in May. EURACTIV reports from Dublin.

Ministers from Germany, France, the UK, Italy, Spain and Poland held a joint press conference on Friday (12 April) calling for the 27-nation bloc to adopt an EU-style FATCA information exchange programme (see background).

The Netherlands and Romania backed the effort the following morning (13 April) when the finance ministers discussed tax issues, after it was placed on the agenda of the meeting at the last minute.

The initiative had a knock-on effect on discussions related to the Savings Directive which requires exchange of information on bank deposits, but has not yet been implemented by Austria and Luxembourg.

Austria isolated

But Austria found itself isolated when Luxembourg confirmed in Dublin that it is preparing to ease its bank secrecy rules by 2015.

“I expect today’s discussions to be formalised and turned into decisions without delay,” Algirdas Šemeta, the commissioner for Taxation and Customs Union, Audit and Anti-Fraud told reporters.

Šemeta, who flew into Dublin at the last minute after tax initiative was added to the ministers’ agenda, said he expected agreement on the stronger Savings Directive within weeks, along with a mandate to start negotiating with Switzerland and the other neighbouring states on bank information exchange, a process that has been held up by the impasse over the Savings Directive.

That left Austria cornered amongst other EU member states, since it is now alone in resisting implementing the Savings Directive.

"Austria is sticking to bank secrecy," Finance Minister Maria Fekter said, placing her country in a minority of one when discussions on the issue among 27 EU ministers get fully under way on Saturday. She said earlier in the week that she would defend the position “like a lioness”.

Fekter defiant

The two-day meeting saw Fekter parry with Britain and France over her country’s position.  

“The UK especially has a plethora of money-laundering paradises and tax havens in its immediate area of legal responsibility – the Channel Islands, Gibraltar, Cayman Islands, Virgin Islands,” she said. “These are all hot spots for tax avoidance and money laundering.”

George Osborne, the British finance minister, defended his country's position, stating that the government has concluded agreements on automatic information exchange with the Channel Islands, and is pushing for more transparency from the UK overseas territories of the Cayman Islands and British Virgin Islands.

"We are in advanced stages of discussions," he said of talks with the two territories. "They are in no doubt about what we expect."

Šemeta told EURACTIV that the Savings Directive was “part of a wider agenda, which also includes a tougher stance against tax havens and abusive tax planning”, and that the two issues could advance in parallel.

Bernard Cazeneuve, France's budget minister, said on Thursday (11 April) that Austria could be placed on a French list of non-cooperative countries if it failed to implement changes to the Savings Directive.

Fekter told reporters in Dublinthat French Finance Minister Pierre Moscovici approached her afterwards and said his colleague “didn’t really mean it when he spoke of putting Austria on a black list.”

But Moscovici subsequently said that France would not shrink from blacklisting any country refusing to participate in the savings tax directive.

Political pressures underline the focus on tax issues

The strong tax emphasis of the meeting has roots in austerity policies across Europe, with member states embarrassed by leaks relating to high-earning citizens dodging tax at a moment when they are implementing tax hikes affecting ordinary citizens.

>> See Offshore havens rocked by bank account leaks (4 April 2013)

“Ministers were grateful for the leaks of information tax dodging that have been appearing in the press,” an EU official present during the ministerial debate told EURACTIV. “They were a bit disappointed that they did not have the same information themselves!” the source added.

Local political issues are also playing a role.

France's former budget minister Jérôme Cahuzac is under investigation for fraud after admitting lying about having a Swiss bank account, an affair that has prompted criticism of President François Hollande.

Van Rompuy puts tax on the agenda for next summit

In Austria, centre-left Chancellor Werner Faymann has advocated a moderate approach to the tax disclosure issue in contrast to the conservative Fekter. Fekter’s strong approach accounts for forthcoming national elections, in which her People’s Party’s pledge to remain firm on tax secrecy could become a polling issue.

In Dublin, as ministers discussed the finer tax points in Dublin Castle, a 20,000-strong crowd of demonstrators audibly railed against the proposed introduction of a local property tax on surrounding streets.

European Council President Herman Van Rompuy has put EU cooperation on taxation issues on the agenda of the next summit of heads of state and government when it meets in Brussels next month.

"We must seize the increased political momentum to address this critical problem," Van Rompuy, who chairs meetings of EU leaders, said in a broadcast statement on Thursday.

"Nobody can deny that bank secrecy is outdated, that we need an efficient system to tackle evasion strategies," French Finance Minister Pierre Moscovici told reporters, flanked by his counterparts from the other countries. "Our mission is to create momentum. When these six major capitals of Europe move together, it creates a strong signal which nobody can resist."

 “The places you can hide [from taxation] are getting smaller and smaller and fewer and fewer,” UK Chancellor of the Exchequer George Osborne said at a joint press conference, which followed a meeting of the EU finance ministers on 12 April. “There is real momentum to tackle this problem of tax evasion.”

 “What we have achieved is the result of a long thinking process,” Luxembourg Finance Minister Luc Frieden said in Dublin (12 April). “It is a strategy of growth which will encourage long-term financing,” he said. “We want to have a level playing field.”

“The surge in Member States’ appetite for progress and action in the fight against evasion is extremely welcome,” said Algirdas Šemeta, the Commissioner for Taxation and Customs Union, Audit and Anti-Fraud.

“Because let’s remember what this is all about: It’s about 1 trillion euros that we are losing from public budgets every year. It’s about creating a fairer environment for citizens, many of whom are currently carrying a heavy tax burden due to the crisis. It’s about allowing Member States to make the right tax choices for them, without being threatened by the malpractices of others. In a nutshell, it’s about fairness and EU solidarity,” Šemeta concluded.

Tax evasion deprives EU governments of roughly 1 trillion euros annually. France, in particular, wants to underscore its determination to tackle tax fraud.

The US Fair and Accurate Credit Transactions Act requires financial institutions – wherever they are in the world – to report almost all transactions to the US tax administration. The nationality of the account holder is irrelevant.

Paris, Berlin, London, Rome and Madrid are working on pilot multilateral exchanges of information (a European FATCA) that would expand automatic information exchange between these states beyond the regulatory framework currently in force in the EU.

  • 22 May 2013: Taxation cooperation to be discussed by EU heads of state and government meeting in Brussels

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