On Air Now

Tune in to Listen

93.9 FM Hibbing, MN

Weather

Current Conditions(Hibbing,MN 55746)

More Weather »
64° Feels Like: 64°
Wind: W 13 mph Past 24 hrs - Precip: 0.03”
Current Radar for Zip

Tonight

Partly Cloudy 42°

Tomorrow

Sunny 71°

Mon Night

Clear 44°

Alerts

  • 0 Severe Weather Alerts
  • 0 Cancellations

Austria feels heat of EU's anti-bank-secrecy drive

European Commissioner for Taxation and Customs Union, Audit and Anti-Fraud Algirdas Semeta addresses a news conference in Brussels after the
European Commissioner for Taxation and Customs Union, Audit and Anti-Fraud Algirdas Semeta addresses a news conference in Brussels after the

By John O'Donnell

BRUSSELS (Reuters) - 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.

As part of a drive to curb tax evasion, Germany has been putting pressure on all "offshore" banking centers in Europe to apply uniform rules on exchanging account holders' information, with particular attention on 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 across the EU. Last week the issue also claimed the job of French budget minister Jerome Cahuzac, who was placed under formal investigation for fraud after admitting lying about having a Swiss bank account.

In a sign that the German-led pressure is having an impact, Luxembourg's finance minister, Luc Frieden, said at the weekend he was prepared to look at easing his country's secrecy rules, although he did not say how or when.

Luxembourg's banking system holds deposits equivalent to about 10 times the tiny country's economy.

The European Commission said Frieden's comments, made to a German newspaper, were a step in the right direction and that the ball was now in Austria's court.

"I very much welcome Luxembourg's new openness to automatic exchange of information, even if it is long overdue," Algirdas Semeta, the European commissioner responsible for tax and customs policy, said in a statement sent to Reuters.

"The spotlight is now on Austria. If it continues to resist this inevitable progress towards greater transparency, it will find itself in a lonely and unsustainable position."

But any expectation that Austria might follow Luxembourg's lead soon was promptly dashed by Finance Minister Maria Fekter.

"I am a hunter of tax cheats but also the protector of honest savers. It is unjustified to open all the savings accounts of those who have done nothing wrong," she told Austria's Oesterreich newspaper on Monday.

"That is why I am fighting like a lion for banking secrecy."

Jean-Jacques Rommes, chief executive of the Luxembourg Bankers' Association, said an EU-wide exchange of information would not create a level playing field but would disadvantage countries with a higher level of foreign account holders.

For example, information on a German's banking activities in Luxembourg would be sent automatically to German tax authorities, but data on the person's domestic accounts in Germany would not, he noted.

MORE TRANSPARENCY

The European Commission wants all 27 EU member states to strengthen rules on how income on savings held in bank accounts is taxed, including an automatic exchange of information about which account holders receive what interest payments.

Nearly all EU members already have such an exchange under rules known as the EU Savings Directive, but Luxembourg and Austria have not wanted to reveal the names of account holders to other countries and instead get the banks to apply a withholding tax.

Most developed countries already share information on taxpayers and depositors "on demand", but since this requires the authorities in the requesting jurisdiction to suspect wrongdoing, it only has limited impact in uncovering unlawful behavior.

Automatic exchange of information allows tax authorities to more easily spot tax evasion or illicit money flows.

Commissioner Semeta said having all EU countries signed up to the same rules on information sharing would bolster the fight against tax evasion.

"Tax evasion cannot be stopped without stronger, quicker and deeper enforcements of automatic information exchange," he said.

"This is the EU standard, and the standard we are pushing for more globally."

Germany's finance ministry said a meeting of EU finance ministers in Dublin later this week could be used to discuss the developments, even if it is not formally on the agenda.

"I expect the signals given by Luxembourg will be used by the Commission and perhaps by the (Irish presidency) to go on the offensive on this issue," said Martin Kotthaus, a spokesman for the German finance ministry.

"I also expect the next informal Ecofin on Thursday, Friday and Saturday in Dublin to be an opportunity to talk about this."

If Luxembourg, which has the largest banking sector in the European Union relative to gross domestic product, signs up to the rules on automatic information exchange, it would make it extremely difficult for Austria to continue to resist.

But there was no sign of imminent change in Austria, especially not before elections in September.

"It is part of the Austrian atmosphere for all people who are going to have accounts in this country that their bank account is secret, and I think that we have to keep that," Austrian Deputy Chancellor Michael Spindelegger told Reuters.

"We are not the Isle of Man, and we are not Switzerland, and we are not other parts of the world where you can hide your money."

Economists said the sea change in attitude from the small, land-locked state reflected the fallout created by the bailout of Cyprus, where the banking sector was on the brink of collapse.

"This is the result of an accumulation of pressure from other countries, and Cyprus can have been the straw the broke the camel's back," said Paul De Grauwe, a professor at the London School of Economics and expert in EU financial affairs.

(Additional reporting by Jan Strupczewski and Phil Blenkinsop in Brussels, Georgina Prodhan in Vienna and Stephen Brown in Berlin; Writing by Luke Baker; Editing by Will Waterman)

Comments