Of the entire European Union, Luxembourg and Austria are the only members that do not publicize the identities of EU residents holding cross-border bank accounts with other EU states. However, according to BBC News, in an attempt to work with foreign tax authorities and help curb tax evasion by foreign depositors, Luxembourg is preparing to ease the transparency of their contentious bank secrecy.
Luxembourg, notorious for secretive banking, is home to a population of only 500,000 people. Despite the small numbers of residents, the country’s banks and financial institutions own assets that exceed the country’s economic output by a factor of 20. The European Commission has expressed that they want all of their 27 members to enforce stricter regulations on how saving accounts are taxed, and provide information about their account holders and their payment interests. Due to the sudden collapse of the Cyprus banking system last month, a few of the wealthier EU countries, seen as tax havens, have been under immense pressure regarding taxes and banking secrecy.
Everyone is pointing the finger at Luxembourg, as the EU government seeks more support to lift out of the recession through raising taxes. Germany, in particular, has accused Luxembourg of being a tax haven. It was only Friday that Germany signed for a tax evasion treaty with Switzerland, another EU member known for banking secrecy.
In a Sunday interview, Luc Frieden, Luxembourg finance minister, told German newspaper Frankfurter Allgemeine Sonntagszeitung, “the international trend is going toward an automatic exchange of bank deposit information. We no longer strictly oppose that,” according to BBC News.
The German finance minister, Wolfgang Schaeuble, seemed pleased with Luxembourg’s cooperation and compliance. He responded to the German newspaper Saarbruecker Zeitung, “I welcome every step towards automatic information exchange,” Sky News reports.
The EU has been pushing for an automatic exchange of information because the knowledge of this information will aid tax authorities in identifying tax evasions and illicit money flows. Luxembourg has agreed to begin easing the country’s secrecy restrictions, however the commencement and how the process would be executed were not made clear.
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Now that Luxembourg financial authorities seem willing to negotiate, the spotlight has shifted to Austria. The European Commission strictly advised the country to follow in similar footsteps, reported Reuters. There seems to be little patience as Finance Minister Maria Fekter warned Austrian newspapers that if the country failed to comply they would be left in isolation and instability.
Fekter stated to Austrias Oesterreich newspaper, as cited in Reuters, “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. That is why I am fighting like a lion for banking secrecy.”
To read more about Luxemourg’s decision, see the full Reuters piece here.
