GO
Loading...

Austria Defies Mounting Pressure to End Bank Secrecy

Ken Reid | Taxi | Getty Images

Austria defied growing pressure to follow Luxembourg in ending bank secrecy, after a group led by Europe's six biggest countries pledged to work together to tackle tax havens.

Late on Friday, the finance ministers of Germany, France, Britain, Italy, Spain and Poland announced their desire to jointly push for more bank transparency, a message they will take to the meeting of the Group of 20 top global economies in Washington next week.

"Nobody can deny that bank secrecy is outdated, that we need an efficient system to tackle evasion strategies," French Finance Minister Pierre Moscovici told reporters, flanked by his counterparts from the other countries.

"Our mission is to create momentum. When these six major capitals of Europe move together, it creates a strong signal which nobody can resist."

On Saturday, three other countries — Belgium, the Netherlands and Romania — joined the initiative, the European Commission's official in charge of tax policy, Algirdas Semeta said.

"It's about allowing member states to make the right tax choices for them without being affected by the malpractices of others," Semeta told journalists, on the sidelines of an EU ministers' meeting. "In a nutshell, it's about fairness."

Poland's finance minister told Reuters that he joined the group to ensure foreign multinationals do not abuse tax regimes for profit. Such companies are particularly important for central and eastern Europe.

"The scale of the problem is smaller in Poland than in western Europe but some of the techniques used in western Europe to evade taxes are being transferred to Poland too," Jacek Rostowski said.

"Citizens must have full confidence that the system is not being abused to evade taxes or for simply for tax fraud," he said. "The fight with tax fraud will be all the more effective if it is conducted on a European and even global level — that's why we joined."

Announcing the cooperation, George Osborne, Britain's finance minister, had said he was pushing for more transparency from the UK overseas territories of the Cayman Islands and British Virgin Islands.

"They are in no doubt about what we expect," he said. "The places that you can hide are getting smaller and smaller."

The announcement adds to pressure on Vienna to sign up to EU rules for the automatic exchange of information on bank depositors.

It follows Luxembourg's decision this week to share foreign bank account details with EU governments from 2015, bringing it into line with all other member states bar one — Austria.

But Austrian Finance Minister Maria Fekter stuck to her earlier position, dismissing such an exchange of information as an invasion of privacy.

"We will fight for bank secrecy. We are no tax haven," Fekter told reporters, placing her country in a minority of one during discussions on the issue among 27 EU ministers.

She defended Austria's practice of imposing tax on interest paid to foreign savers, money collected and returned to their home country's government — but with no names attached. The European Union wants information about accounts to be given.

"Our neighbors get their fair tax delivered," she said, claiming that any automatic exchange of information would lead to an overload of data that would not be used.

"It's much more sensible to deliver the money rather than a graveyard of data," she said. "That brings more money quicker into the tax coffers and is genuinely tackling tax evasion."

She had earlier attacked the Group of 20 top economies for not taking what she branded centers of money laundering such as the Cayman Islands, Virgin Islands or Delaware.

Confidentiality is so cherished in Austria that banking secrecy, which has deep traditional roots, is anchored in the constitution.

But Fekter faces a difficult fight. Tax evasion deprives EU governments of roughly 1 trillion euros ($1.3 trillion) annually. France, in particular, wants to underscore its determination to tackle tax fraud.

France's former budget minister Jerome Cahuzac is under investigation for fraud after admitting lying about having a Swiss bank account, an affair that has prompted criticism of French President Francois Hollande.

EU leaders will also discuss how to combat the tax haven issue when they meet next month.

"We have, for many different reasons, a strong momentum," Germany's Finance Minister Wolfgang Schaeuble told journalists. "We will use it."

Fekter may even struggle to have her way in Austria, with some pushing for a more moderate approach, including Chancellor Werner Faymann. He has said Austria could share information on foreigners' accounts without violating banking secrecy.

Fekter had told journalists she was open to "talks and negotiations" and drew a distinction between surrendering information about account holders and bank account activity. But it was unclear, following her repeated insistence that bank secrecy would remain, where any compromise was possible.

Contact Europe: Economy

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    To learn more about how we use your information,
    please read our Privacy Policy.
    › Learn More