Saturday

4th Dec 2021

Austria and Luxembourg accused of undermining EU credibility

  • Vienna street: EU finance ministers drew a blank on bank secrecy (Photo: Valentina Pop)

Luxembourg and Austria came under attack on Tuesday (10 December) after the two countries stood firm and blocked plans to increase transparency in tax reporting.

At a meeting of finance ministers in Brussels, the final formal gathering of 2013, ministers from the two countries insisted that they will not agree to a reformed savings tax directive until the EU has reached agreements on banking secrecy with nearby tax havens such as Liechtenstein and Switzerland.

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EU tax commissioner Algirdas Semeta said he was "clearly disappointed," adding that the two countries' intransigence was "incomprehensible" and "out of sync" with the public mood.

At the EU summit in May, leaders pledged to close the loopholes by agreeing the directive by the end of the year.

"Although some encouraging developments have occurred, we have not yet reached the light in the tunnel," said Luxembourg's finance minister, Pierre Gramegna.

Gramegna warned that the EU risked a flight of capital until it had reached a third-country agreement.

Semeta, for his part, said that although talks with European tax havens had progressed "we have some way to go before we have signatures on dotted lines."

Under the existing rules on savings, EU countries tell each other how much interest non-residents earn on bank deposits, but do not share data on interest earned from other financial products such as investment funds, pensions, trusts or foundations.

The EU executive has been pushing governments to tighten the rules since 2008 as part of a general crackdown on tax evasion and avoidance, an issue that has become particularly heated as governments bid to beef up their tax revenues and reassure citizens that tax regimes are fair.

EU leaders have also put on a united front on the issue at G8 level.

With agreement having failed at ministerial level, the issue is now set to appear on the agenda of the EU summit next week

An agreement "would have to be pursued by the leaders themselves," said Semeta.

Earlier, Semeta had urged Luxembourg and Austria to "end their resistance" to the legislation.

"Automatic exchange of information is here…and we cannot leave this proposal hanging in the air," he said.

Meanwhile, other ministers also piled on the pressure. France's Pierre Moscovici warned that agreement was essential for the EU to be credible in combating fraud and tax evasion.

"It's very difficult to explain what is going on," said Italian Fabrizio Saccomanni, adding that the "stalemate" was causing "embarrassment" to the EU's reputation.

Luxembourg may loosen bank secrecy

Luxembourg may consider opening up its massive banking sector to greater scrutiny following concerns people are stashing away wealth from foreign tax inspectors.

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.

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