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EU strips bank secrecy from cross-border tax defences

Published on 07/12/2010

The EU claimed a long-delayed deal Tuesday removing bank secrecy as a reason for blocking information sharing in a bid to clamp down on cross-border tax fraud and boost austerity-battered state coffers.

The European Union’s taxation commissioner Algirdas Semeta said finance ministers had taken “a huge step forward in the fight against tax evasion and tax fraud in the EU” at a time when public budgets are under intense pressure.

“Tax evaders can no longer exploit bank secrecy as an excuse,” he said of new arrangements that will introduce time limits for national tax authorities to answer requests for information on citizens or businesses and parameters for the “automatic” exchange of information.

Belgian Finance Minister Didier Reynders, who chaired talks among all 27 EU states, said it would also mean “an important step on the road to budgetary consolidation” for debt-laden partners.

The deal, which covers “income from employment, directors’ fees, dividends, capital gains, royalties, certain life insurance products, pensions, and ownership of and income from immovable property,” will apply from January 1 next year, but is not retroactive.

The reform was blocked almost one year ago by Austria and Luxembourg, which maintain a form of banking secrecy. The initiative still rests on conditions relating to what information should be “available,” a maximum of five of the above income categories from 2015, eventually aiming for eight.

Luxembourg’s finance minister Luc Frieden said important concessions had been secured, notably that “fishing expeditions are not permitted,” meaning requests for information must concern specific identities.

Likewise, with an element of choice in the list covered by the new agreement, Frieden said it was critical that the list did not include savings, “and therefore banking data.”

Frieden said the deal leaves individuals “the possibility to manage their resources across frontiers, guarding their privacy while being cooperative in the fight against fiscal fraud.”