Luxembourg ready to submit to automatic information
exchange
11 April 2013
Luxembourg has yielded to EU demands for the
automatic exchange of bank account information with other EU states
by 2015.
Neither Luxembourg nor Austria currently
participate in automatic exchange of interest payment information
between EU governments, as mandated by the European Union Savings
Directive. Instead they impose a withholding tax on cross-border
interest payments, thus collecting revenues while protecting the
client's identity from their home government.
Other EU members, enthusiastically backed by
the European Commission's (EC) Tax Chief Algirdas Semeta, have long
called for the two countries to adopt automatic information
exchange. However, both governments have so far considered that
they need banking secrecy to help their financial centres compete
with Switzerland and Liechtenstein.
On Tuesday, Luxembourg's Finance Minister Luc
Frieden said the jurisdiction was open to more transparency and was
considering dropping its resistance to automatic exchange. This
hint was rapidly followed by a formal announcement from Prime
Minister Jean-Claude Juncker, who said: ‘Whereas Luxembourg still
considers the withholding tax to be a most effective instrument to
ensure tax compliance and guarantee data protection, it also
acknowledges that international developments (by which he meant the
US Foreign Accounts Tax Compliance Act (FATCA), and the
abandonment of the Swiss-German withholding tax agreement) point to
a broader use of automatic exchange of information in tax matters
... The government has therefore decided to introduce, on 1 January
2015 ... the automatic exchange of information for all interest
payments made by Luxembourg financial operators to individuals
resident in another EU Member State, so as to ensure taxation
according to the laws of the latter.’
Juncker claims that Luxembourg's banking
sector has followed a ‘resolute white money strategy’ and ‘doesn't
live off black money and tax evasion’.
Residents of Luxembourg will not be affected
by the new law and will continue to pay a 10 per cent withholding
tax on interest payments, retaining full banking secrecy. American
taxpayers will be subject to a separate FATCA-related bilateral
agreement currently being negotiated between Luxembourg and the US
government. Tax residents of other non-EU countries are also
unaffected.
Austria is now under heavy pressure to follow
suit. Chancellor Werner Faymann has promised to join Luxembourg for
‘very cooperative’ negotiations with EU Finance Ministers at a
meeting in Dublin this week. However, Austrian Finance Minister
Maria Fekter insists that she will fight to protect banking secrecy
and that information sharing would not apply to Austrian
taxpayers.
‘Austria is the last member state not to apply
automatic exchange of information,’ said a spokesperson for EC Tax
Commissioner Semeta. ‘We understand that there are ongoing
discussions in Austria, at this moment, on this issue and we hope
that they will be able to follow Luxembourg’s lead.’ Semeta himself
warned Austria against clinging to a ‘lonely and unsustainable
position’.
Sources
Zone Bourse (Luxembourg government statement in English)
Reuters
Reuters (2)
Russia Today
Bloomberg
Washington Post
Dow
Jones