Source: The NY Times – Austria Gives Ground on Banking Secrecy at Meeting of European Union Leaders
The European Union inched closer to ending bank secrecy on Wednesday when Austria agreed to eventually start sharing personal bank account information with other countries as long as similar rules also applied to tax havens like Switzerland that are not part of the 27-nation bloc.
It was the first time that Austria, long notorious for its opaque banking culture, has made such a commitment, after rebuffing calls for greater transparency for a decade. The country’s chancellor said it expected to reach an agreement in principle on the matter by the end of the year.
That news, at a summit meeting of European leaders here, upstaged a separate but related topic that has dominated headlines this week: tax-reduction strategies by big multinational companies like Apple, which Congressional investigators in Washington say reduced its tax bill by setting up companies in Ireland.
Pressure on Austria has grown more intense as European countries try to curb citizens’ ability to stash money in other jurisdictions, shortchanging their home governments of tax revenue during a time of lean budgets and gaping deficits.
Ferreting out hidden bank accounts has become a cause célèbre in many countries, especially Greece, which has jailed hundreds of people suspected of tax delinquency, including former government officials. In France, Jérôme Cahuzac, a French minister responsible for fighting tax evasion, resigned upon admitting, after weeks of denials, that he had held a secret bank account in Switzerland.
The European Commission, the administrative body for the union estimates that tax fraud and legal tax avoidance by individuals and companies cost governments there a total of $1.3 trillion a year.
The crackdown on bank secrecy in Europe is also a result of American demands for fuller cross-border sharing of information under the Foreign Account Tax Compliance Act.
“We will act jointly, and I believe we will manage the exchange of data by the end of the year,” the Austrian chancellor, Werner Faymann, said at the meeting here.
Mr. Faymann said it was a “bad day for tax cheats.” But he stressed that Austria’s concessions were contingent on the “negotiations with third countries” like Switzerland. Austrian officials say that without overhauls in those other jurisdictions, financial services industries in the European Union would be at a competitive disadvantage.
The European leaders, who met for four hours on Wednesday, also confirmed that the European Commission would negotiate tougher agreements with five countries: Switzerland, Andorra, San Marino, Monaco and Liechtenstein.
The chances of the other countries agreeing quickly are not great. And bloc officials warned that those countries could turn the tables by asking the union to make changes first, risking a standoff.
But those countries are also being pressed by the United States for details of all accounts held by American taxpayers. Under that pressure, they may decide there is not much point in digging in their heels with the European Union.
The European negotiations might also clear the way for action by Luxembourg, a bloc member that agreed last month to share banking data starting in January 2015. But it is still awaiting the outcome of talks with the Swiss before deciding whether to expand the information exchange agreement to include investments like trusts and foundations.
Once discussions with Switzerland are completed, Jean-Claude Juncker, the prime minister of Luxembourg, said his country “would be in a position to decide the extent of the expansion” of the information exchange.
The summit meeting was billed as an opportunity to push ahead with a crackdown on tax evasion, but it risked being overshadowed by mounting indignation over reports that American companies, including Apple, had sheltered profits in European countries like Ireland.