Tuesday, December 10, 2013

Austria, Luxembourg continue to defend dirty money, undermine EU

From the EU Observer:
Luxembourg and Austria came under attack on Tuesday (10 December) after the two countries stood firm and blocked plans to increase transparency in tax reporting.

At a meeting of finance ministers in Brussels, the final formal gathering of 2013, ministers from the two countries insisted that they will not agree to a reformed savings tax directive until the EU has reached agreements on banking secrecy with nearby tax havens such as Liechtenstein and Switzerland.
This is the so-called 'level playing field' argument which tax havens have used since time immemorial. 'We won't do this until others do,' they cry - while the others cry the same thing. Nothing gets done. And in the unlikely event of getting sign-up, they expand the playing field! Singapore!

Switzerland and Luxembourg are numbers one and two in our widely referenced Financial Secrecy Index, and we think it is important periodically to remind people of the political and economic corruption at the heart of these financially captured states. We urge people to read our narrative report on Luxembourg in particular (as well as a shorter one on Austria, and perhaps also our earlier ruminations on the need to ostracise Austrian ostritches) to understand some of the political dynamics involved. These two states inside the EU have been in a close alliance with Switzerland, just across the EU's borders, to try and head off powerful amendments to the EU Savings Tax Directive, a major transparency enhancement that ought to enable European taxpayers to tax their wealthiest citizens.

Luxembourg and Switzerland were both slammed by the OECD last month for their failures to address dirty-money concerns. Quite right too.

Luxembourg's Finance Minister Pierre Gramegna warned that transparency would mean a 'flight of capital." So tell us, Mr. Gramegna: what kind of capital might flee transparency?  Why, criminal money, of course! We challenge Mr. Gramegna to say this explicitly - or to explain how this logic doesn't work. We won't be holding our breaths.

Luxembourg and Austria are an embarrassment to the European project - as if the union weren't suffering enough credibility problems already. And it's not just us who are saying it. From the EU Observer and Bloomberg and the Global Post:
"EU tax commissioner Algirdas Semeta said he was "clearly disappointed," adding that the two countries' intransigence was "incomprehensible" and "out of sync" with the public mood."

France's Pierre Moscovici warned that agreement was essential for the EU to be credible in combating fraud and tax evasion. "Frankly, this is becoming incomprehensible for our citizens."

"It's very difficult to explain what is going on," said Italian Fabrizio Saccomanni, adding that the "stalemate" was causing "embarrassment" to the EU's reputation, and that this was just "an excuse," while the status quo "benefited only those who cheat on their taxes."
"This impasse is completely unacceptable," Spanish Finance Minister Luis de Guindos said. He said such arguments are “a sort of alibi” that have been “paralyzing” ministers for a long time.
(Quotes from two different stories have been woven together in the above section.)

Moscovivi said it was "essential" to clear the dossier for EU leaders who hold a summit on December 19-20 in Brussels. We hope that civil society and other groups put pressure on their leaders to take a stand against these rogue European financial states.

Update 2014: for background on Information Exchange see here.


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