Bank deal pressures Austria and Luxembourg

Europe’s five largest economies – Germany, the UK, France, Italy and Spain – have signed a deal to automatically share bank details of account holders as part of a push to combat tax evasion, writes theEUobserver.

The new agreement puts “increasing pressure” on Austria and Luxembourg to drop their threatened veto of a similar EU-wide accord. The finance ministers from the five nations wrote to European Commissioner on Fiscality, Algirdas Šemeta saying they have agreed a pilot scheme, based on the US Foreign Account Tax Compliance Act, which requires banks to notify US tax authorities of any American clients. The EUobserver says –

A similar EU-wide law has so far been held up by Austria and Luxembourg, both keen on preserving bank secrecy for domestic and foreign clients. […] The collapse of the Cyprus banking system – which like Luxembourg’s was much larger than the country’s GDP – and a series of revelations about the offshore banking model have increased pressure on Austria and Luxembourg to change their position. Luxembourg has already signalled “openness” to discuss bank secrecy.

However, “the decision is not trivial”, writes Spanish daily ABC,

as it means a substantial advance in the fight against tax evasion, and so, against tax havens in Europe […] but European reality concerning taxes is stubborn and any advance in Brussels becomes difficult as any decision, even at its minimum, requires unanimity — something impossible in practice taking into account that some countries within Europe, as Luxembourg or Austria, have policies which rely very much on banking secrecy, and mean huge profits for banks based in those countries and for their clients.