Luxembourg has become the latest in a series of former so-called tax havens to announce the ending of offshore banking secrecy. The Luxembourg government announced that from 1 January 2015 it will automatically exchange financial information with all other EU member state tax authorities.
Luxembourg’s Prime Minister, Jean-Claude Juncker, said: “Luxembourg’s financial centre does not live off dirty money and tax fraud”.
The tiny state (population 500,000) will automatically exchange information about interest bearing bank accounts held by EU (including UK) residents, held at any of its 141 banks. It may also extend the reporting to include other financial products (e.g. life insurance contracts) and to some legal entities, such as trusts. Dividend payments are not currently planned to be included.
Luxembourg is currently in negotiations with the USA regarding compliance with the American Foreign Account Tax Compliance Act (FATCA). Juncker knows that if Luxembourg did not abolish banking secrecy it would be cut from the US financial markets, and also “could not refuse to give Europeans what it would agree to give the Americans.”
Austria is now the only EU country not to have signed up to the tax information exchange agreements. Austria appears to be playing hardball at the moment – demanding that before it lifts the veil from its secret bank accounts it expects Britain to enforce greater transparency in respect of all of the Crown Dependencies and Overseas Territories. The Austrian finance minister said: “We want a trust registry for the Channel Islands, but also for countries where British law applies, such as the Cayman Islands, the Virgin Islands or Gibraltar. These are all areas that are havens for tax evaders.”
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