Austria, Luxembourg ease stance on bank secrecy

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Austria will join Luxembourg for talks with the European Union on how to crack down on cross-border tax cheats, Chancellor Werner Faymann said today (9 April), signaling an easing of its hardline stance on bank secrecy.

But the Social Democrat's conservative coalition partners cited legal obstacles to sharing for the first time personal information on bank depositors, a touchy subject ahead of elections due by late September.

The European Commission warned Austria on Monday that its banking secrecy regime would leave it in a "lonely and unsustainable position" if it did not follow the same rules as other countries in sharing information on foreign depositors.

The offshore financial industry has been hit by the leak of 2.5 million secret bank accounts of companies and nationals in 170 countries to 86 journalists worldwide. This prompted the Commission to push for more action against tax evasion and have some 30 proposals adopted.

>> Read: Offshore tax havens rocked by bank account leaks

"We will hold negotiations together with Luxembourg," Faymann told reporters after a cabinet meeting.

Asked if that meant Austria was giving up its decades-long resistance to sharing the identities of savers, he said: "We are conducting these talks together with Luxembourg so that something comes out of it. That is what it means."

He said the issue was how to address accounts held by foreigners rather than by Austrians.

Conservative Finance Minister Maria Fekter stressed that Austrian law does not let the country share personal information about bank depositors with other states.

"In our constitution, privacy and data protection get very high priority. That really does not fit with an automatic exchange" of depositor data, she told reporters.

Deputy Chancellor Michael Spindelegger, leader of the conservative People's Party, also took a more cautious line, saying Austria was always ready to go after criminals trying to abuse the banking system but would not expose all bank accounts.

"We want full enlightenment but this […] does not mean all savings in Austria will automatically be addressable by foreign authorities," he said.

"We will enter negotiations and see that we achieve just what we want in these negotiations."

As part of a drive to curb tax evasion, Germany has been pressing all "offshore" banking centers in Europe to apply uniform rules on exchanging account holders' information.

Particular attention has been paid to Luxembourg and Austria, the only EU states holding out.

Last month's bailout of Cyprus, where the banking system was swollen by foreigners drawn by low taxes and easy regulation, has served to focus attention on such jurisdictions.

In a sign that the German-led pressure is having an impact, Luxembourg finance minister Luc Frieden said on Tuesday it was considering ending its bank secrecy rules, automatically handing over details of bank account holders to other EU countries.

"It has not been decided, it is something that is being discussed in the government," Frieden told Reuters.

Positions

Taxation Commissioner Algirdas Šemeta stated on 8 April:

"Recent developments, fuelled by the outcome of the Offshore Leaks, confirm the urgency for more and better action against tax evasion.

He reminded that the Commission had put a comprehensive package of measures on the table last December to fight fraudsters, discourage evaders and ensure fair burden-sharing in taxes. In brief, he described what is needed to better fight against fraud and evasion:

“We need automatic exchange of information to be widely applied, as this is the most effective way of allowing countries to collect the taxes they are due.

“We need a tough common stance against tax havens, including sanctions against those who facilitate evaders.

“And we need to block off the pathways to aggressive tax planning and close opportunities for abusive tax practices.

“Now it is time to put words into action. I hope to see rapid adoption of our proposals for a stronger EU stance against tax fraud and evasion,” Šemeta concluded.

Background

Every year, an estimated €1 trillion in public money is lost in the EU due to tax evasion and avoidance.

At their March 2012 summit, EU heads of states asked the European Commission "to rapidly develop concrete ways to improve the fight against tax fraud and tax evasion, taking third countries into account, and to report by June 2012.

The European Commission followed up with proposals tabled on 6 December 2012. They include two recommendations, the first encouraging member states to identify tax havens and place them on national blacklists, and the second one addressing loopholes which some companies exploit to avoid paying their fair share.

Other initiatives include a Taxpayers' Code, an EU Tax Identification Number, a review of the anti-abuse provisions in key EU Directives, and common guidelines to trace money flows. [more]

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