Some days ago, Brussels-based group Transparency Europe launched an online petition to tackle tax havens in Europe, demanding also a “truth commission” to investigate Switzerland’s role in corruption and tax evasion. Last week Germany, France, Britain, Italy and Spain agreed to develop a system that would make it easier to clamp down on tax evaders by automatically exchanging information among those countries. The five countries said the mechanism was inspired by the U.S.’s Foreign Account Tax Compliance Act, or FATCA.
Yes, because Europe has several tax havens within its own borders. Switzerland is the world’s biggest offshore centre with $2.1 trillion in assets, according to the Boston Consulting Group. But Switzerland is not the only case. Tax havens are also in EU member States such as Luxembourg, the home town of the previous Eurogroup President Jean-Claude Juncker. Unexpectedly Luxembourg has announced some days ago plans to lift bank secrecy rules from 2015 for EU citizens who have savings there, adding in so doing pressure on Switzerland. At this regard, Juncker, current PM of Luxembourg, said that “we cannot deny to the Europeans all that we will have to concede to the Americans in a bilateral treaty," Better late than never. Luxembourg, with a banking industry roughly 22 times the size of its economy and with deposits 10 times its GDP, has come under heavy pressure to change in recent weeks.
Apparently the EU has to thank the Germans and the European Commission for putting pressure on Luxembourg. Germany’s Finance Minister Wolfgang Schaeuble welcomed Luxembourg’s move: “This is truly no small step for Luxembourg and it deserves our respect”.
The recent scandal in France about the former budget minister Jerome Cahuzac that he had held a secret Swiss bank account prompted a strong stance from the European Member States and the EU to clamp down on tax evaders. The French president also unveiled measures aimed at increasing transparency for people holding government or elected offices and reinforcing the fight against corruption and tax fraud. The French government has been scrambling to come up with a political response to the admission by Jérôme Cahuzac, who spearheaded France’s battle against tax evasion until his resignation as budget minister last month, that he held an undeclared foreign bank account for two decades.
Now is the turn of Austria. Luxembourg’s announcement leaves Austria as the only country not fully signed up to savings directive rules. Its finance minister said this week she would “fight like a lion” to defend the country’s banking secrecy regime. But Chancellor Werder Faymann signaled an easing of Vienna’s hardline stance, saying on Tuesday that Austria would join Luxembourg for talks with the EU on how to crack down on cross-border tax cheats. The European Commission warned Austria on Monday that its banking secrecy would put it in a “lonely and unsustainable position” if it did not adopt the same rules as other countries in sharing data on foreign depositors.
On the contrary, the European Commission warmly welcomed the announcement by Juncker and said discussions were ongoing with Austria to encourage it to fully sign up to the EU’s savings directive, a piece of legislation that advocates say will help in the fight against tax evasion across the EU. Meanwhile the losses imposed on uninsured deposit holders in the bailout of Cyprus underscored the weak bargaining position of smaller EU states should they run into difficulty.
Tax havens are not just a financial problems but also a matter of social responsibility.