Luxembourg and Austria drop opposition to banking directive
States agree to automatic exchange of non-EU citizens’ savings account details
After years of opposition, Luxembourg and Austria have agreed to back automatic exchange of savings account information on non-citizens to tackle tax fraud in the EU. Their shift was welcomed by other EU leaders meeting in Brussels and allows ministers to sign off next week on the changes to the savings taxation directive – ending bank secrecy for non-citizens in EU countries in January 2017. “Banking secrecy is set to die,” said European Council president Herman Van Rompuy.
Austrian chancellor Werner Faymann said the shift would help fight tax evasion, bringing in additional state income for investment and economic stimulus programmes. “Banking secrecy remains for Austrians; granny’s account was never affected by this,” he said in Brussels, highlighting how the decision was linked to an undertaking to step up talks with other countries favoured by tax avoiders: Switzerland, Liechtenstein,Monaco, Andorra and San Marino. As in Austria, resistance to ending banking secrecy in Luxembourg was linked to its success in attracting investment – and related income – thanks to its reputation for discretion and light-touch financial regulation. The Grand Duchy of Luxembourg, with just 500,000 citizens, is one of the richest countries in the world, its banks holding savings estimated at €3 trillion. Luxembourg’s premier, Xavier Bettel, said he was “pleased” by the agreement, adding: “Luxembourg will become a transparent banking location.” While other EU member states exchange information automatically, Luxembourg and Austria exercised their right to transitional measures and impose an anonymous 35 per cent withholding tax. The changes to the 2005 savings taxation directive require member states to exchange automatically information on interest payments on savings of citizens of other member states, allowing them to be taxed in accordance with laws where they are tax resident.
The Brussels agreement extends existing regulations to profits earned by trusts, foundations and insurance policies. The future of wider banking secrecy provisions, via automatic information transfer, depends on the outcome of ongoing discussions at the Organisation for Economic Co-operation and Development. A European Commission study suggested that tax avoidance and fraud under existing provisions cost the EU €1 trillion annually in lost tax income. Aid agency Oxfam called it a decisive step in tackling tax evasion, saying European unity meant the EU could set the bar high in G20 tax talks in September. “Only with a truly global and inclusive system to share information can the world pinpoint those individuals and companies harbouring money away from the world’s poorest,” said Natalia Alonso, head of Oxfam’s EU office.
Credit: Irish Times