'Prince' Sarkozy praises Andorran subjects on tax

29th July 2010, Comments 0 comments

France's President Nicolas Sarkozy praised the tiny mountain principality of Andorra for reducing tax evasion Thursday, one year after threatening to abdicate as its honorary monarch.

Since the 16th century the kings, emperors and latterly presidents of France have also been princes of Andorra, serving jointly as head of state with the Catholic Bishop of Urgell in Spanish Catalonia.

Last year, however, His Excellency Prince Nicolas threatened to abandon the royal title in protest at Andorra's murky banking secrecy laws, which he said helped depositors hide from the French Republic's tax collectors.

Since then, the self-governing principality -- best known to the French as a ski resort and a stop-off to buy cheap booze and cigarettes on the Spanish border -- has begun reforms to lose its reputation as a tax haven.

"Transparency is not in conflict with the Andorran identity. The progress that you have made is considerable," Sarkozy told subjects in the Andorran parliament on his first visit to his domain since 2007.

"No one can criticise you for competitive tax rates, but tax fraud is another matter. Can we build something serious on secrecy, fraud, on a speculative bubble?" he asked, rhetorically.

"One day reality catches up with you, and who pays? The people."

Sarkozy repeated this message before a small crowd of around 2,000 Andorrans, a small turnout in this nation of 85,000 people, given that authorities had ordered businesses closed to mark the visit.

In September, Andorra's 28 members of parliament passed a bill partially lifting banking secrecy laws and signed bilateral deals to share tax information -- on request -- with several countries, including France.

The Organisation of Economic Cooperation and Development (OECD), the club of the world's leading developed democracies, agreed in February to take Andorra off its "grey list" of uncooperative tax havens.

"I commit Andorra to pursuing these efforts," Sarkozy said.

Andorra imposes no direct payroll tax and has very low sales taxes, but has promised that later this year it will pass another law to bring it closer to the norm in its European neighbours.

If this goes through, France could sign an agreement to protect Andorran residents from double taxation in both countries.

The speaker of the Andorran parliament, Josep Dalleres, said that Sarkozy's "heavy-handed" princely threat had been irritating, but admitted that its had "been a way to make us react".

"Thanks to the work of all our institutions, we have moved Andorra out of the grey zone of lost opportunities and a feeling a guilt," said the head of government, Jaume Bartumeu Cassany.

Andorra has been a sovereign state since adopting a constitution in 1993, but is not a member of the European Union and escapes Brussels directives.

Sarkozy said, however, that he would support Andorra's attempts to move closer to the Wnion, probably by signing some form of association agreement.

But while the political row between Andorra and its big northern brother seemed, in Cassany's word, to have "dissipated", on the level of protocol Sarkozy's trip was less successful, and he left some locals fuming.

While traditionally a visiting monarch is supposed to tour all of the country's six administrative parishes, Sarkozy only saw one -- the capital Andorra la Vella -- and only stayed for two-and-a-half hours.

© 2010 AFP

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