Tuesday

3rd Oct 2023

Luxembourg says No to new EU tax law

Luxembourg, one of the EU's smallest but richest countries, has said No to a new law against tax evasion.

Its finance minister, Luc Frieden, told press in Brussels on Monday (13 May): "We won't agree tomorrow to the savings tax directive with an extended use because there's still some need for clarification."

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

He added: "At the moment we lack precision about a number of questions that need answers … We don't know how this will be written into European law and we're not sure that all the loopholes have been closed, in particular a number of trusts don't seem to be covered."

The European Commission has been trying to update its anti-tax-fraud legislation for the past eight years.

Its 2005 law forces member states to automatically exchange information on EU nationals' deposits in other European Union countries.

But it contains gaps on income received via investment funds, pensions, trusts and foundations.

It also contains a big hole on Austria and Luxembourg.

The two financial centres are exempt from automatic exchange until such time as five non-EU tax havens - Andorra, Liechtenstein, Monaco, San Marino and Switzerland - agree to it as well.

Luxembourg's reluctance to go ahead puts it on a collision course with major EU states, including France, Germany and the UK.

Their finance ministers will bash heads with Frieden at a meeting in Brussels on Tuesday.

EU leaders will also tackle the subject at a summit on 22 May.

"It is a test of our seriousness and the world is watching us," British finance chief George Osborne said in a letter to his EU counterparts ahead of Tuesday's talks, the Financial Times reports.

"If agreement on automatic data exchange is not reached at Ecofin [the EU finance ministers' meeting] on 14 May, it will be achieved a week later at the meeting of heads of government," Austrian Chancellor Werner Faymann told the Kronen Zeitung newspaper on Sunday.

Frieden's statement also appears to clash with Luxembourg's earlier commitment to end bank secrecy by 2015.

But he did agree to let the commission launch talks with the group-of-five non-EU tax havens on farming out the automatic data exchange rule.

"We can agree to the [negotiating] mandate now, and we couldn't in the past, because the mandate has been changed," he said, noting that the new text includes an EU commitment to push for tax transparency among the G20 group of leading world economies.

The commission estimates that crisis-hit EU treasuries could harvest up to €1 trillion in extra tax income if the new law is put in place.

Luxembourg, home to just half a million people, has a GDP per capita which is almost three times the size of the EU average.

Its wealth comes mainly from financial services.

Its banking sector is worth 22 times the size of its economy.

EU targets tax evasion on savings

The EU commission wants to tighten tax loopholes for EU citizens who hold accounts in member states and in Switzerland, Andorra, San Marino, Monaco and Lichtenstein.

EU seeks quick deal on tax transparency

The EU is hoping to reach agreement on automatic exchange of data on overseas bank accounts, according to a letter sent to national capitals on Wednesday

Analysis

Is the ECB sabotaging Europe's Green Deal?

The European Central Bank (ECB) recently raised interest rates to the highest point in the currency's 21-year existence — but the effects of its policies on renewables are badly understood.

Opinion

How do you make embarrassing EU documents 'disappear'?

The EU Commission's new magic formula for avoiding scrutiny is simple. You declare the documents in question to be "short-lived correspondence for a preliminary exchange of views" and thus exempt them from being logged in the official inventory.

Latest News

  1. EU demands 'full clarity' from Warsaw on visa-scandal
  2. EU reveals 10 'critical tech' in bid to de-risk from China
  3. EU Commission at a loss over latest snub from Tunisia
  4. Northern Europe — the new Nato/Russia frontline
  5. The EU-Kenya free trade deal shows a waning 'Brussels effect'
  6. Hoekstra pledges to phase-out fossil fuel subsidies
  7. 10 years on from the Lampedusa shipwreck — what's changed?
  8. EU ministers go to Kyiv to downplay fears on US, Slovak aid

Stakeholders' Highlights

  1. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  2. International Medical Devices Regulators Forum (IMDRF)Join regulators, industry & healthcare experts at the 24th IMDRF session, September 25-26, Berlin. Register by 20 Sept to join in person or online.
  3. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  4. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA
  5. International Medical Devices Regulators Forum (IMDRF)Join regulators & industry experts at the 24th IMDRF session- Berlin September 25-26. Register early for discounted hotel rates
  6. Nordic Council of MinistersGlobal interest in the new Nordic Nutrition Recommendations – here are the speakers for the launch

Join EUobserver

Support quality EU news

Join us