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April 11, 2013

Austria Slams US, UK 'Tax Havens'

by Reuters

Austria hit back at critics of its banking secrecy on Thursday by urging Britain and the United States to crack down on money laundering and tax havens in their own backyards, as EU ministers prepared to debate the issue in Dublin.

Isolated in the European Union following Luxembourg's move this week to share foreigners' bank data to foil tax cheats, Austria's finance minister said she could discuss such a change of tack - but insisted it could not be a "one-way street" and accused London and Washington of failing to close international tax loopholes in the likes of Delaware and the Channel Islands.

"Delaware and Nevada are tax havens and money-laundering centers that have to be laid bare just as much,'' Fekter told Die Presse newspaper and adding that Britain was "the island of the blessed for tax evasion and money-laundering.''

Last month's $13 billion EU and IMF bailout of Cyprus, which raised questions over the way the island's crippled banks had ballooned with money from Russia and elsewhere, has given new prominence to efforts within the EU and between Europe and the United States to make it harder for citizens to shelter savings from tax in secret accounts in other countries.
       
The Irish hosts said the EU's 27 finance ministers will discuss a pilot project being pursued by the bloc's five largest economies to deepen cooperation on tackling tax evasion during two days of talks in Dublin that start on Friday.

There could be some frank talking as Vienna defends a long tradition of banking secrecy, of a kind the likes of non-EU member Switzerland, and now Luxembourg, have agreed to curtail.

France's budget minister, whose predecessor was forced out last month in a scandal over a secret Swiss bank account, warned Austria on Thursday that it risked being blacklisted for financial transactions if it did not agree to reveal to their governments which foreign EU citizens had accounts in its banks.

"It's not normal that a country like Austria for example doesn't communicate the information it has concerning EU citizens who hold accounts there,'' Bernard Cazeneuve said.

"If these countries don't cooperate, if there isn't an agreement for an information exchange that allows for total transparency at the heart of the European Union, these countries expose themselves to the risk of appearing on the list of non-cooperating states and territories,'' he told France-Info radio.

Austria's Defense
       
For her part, Fekter said Britain, and notably associated territories like the Channel Islands, should be bound by rules that EU governments now required of Cyprus to prevent people controlling companies and trusts anonymously.

"What we demand of Cyprus, a small island, we also demand of the [United] Kingdom,'' Fekter, a conservative member of Austria's governing coalition, told Die Presse.

She told Kurier newspaper: "We want a trust registry for the Channel Islands but also for countries where British law applies such as the Cayman Islands, Virgin Islands or Gibraltar ... These are all areas that are havens for those fleeing taxes.''

Luxembourg, the only other EU country that had refused to swap personal data on savers in its banks, said on Wednesday it would so by 2015, heaping pressure on Vienna to follow suit.

Chancellor Werner Faymann, a Social Democrat, said this week that Austria was ready to negotiate with Brussels as long as bank secrecy remained intact for Austrian citizens. But his conservative junior coalition partners have taken a harder line.

The European Commission warned Austria on Monday that its banking secrecy would put it in a "lonely and unsustainable position'' if it did not adopt the same rules as other countries in sharing data on foreign depositors.

The United States is also after citizens that stash wealth abroad, and is set to start talks with Austria soon.

EU officials have threatened to sue Austria if it gives the United States information about its citizens' bank accounts here but refused to do the same for other EU members.

Austria now withholds tax on EU citizens' interest income and sends the money anonymously to their home countries. Austrian bankers have played down the potential impact of sharing information on foreign depositors.

Cyprus Bailout

Fallout from the Cyprus bailout will top the agenda of the EU finance ministers meeting, with focus also on growing German reluctance over eurozone banking reform.

Unease surrounding the rescue package for Cyprus grew on Wednesday after Reuters and other news organizations obtained documents detailing how the bailout will be financed and how much of the total Cyprus is now expected to contribute.

Cyprus was originally meant to come up with seven billion euros, and the EU and IMF would provide 10 billion, but the documents show the total package will now cost 23 billion euros, with Cyprus providing 13 billion of that. There is likely to be intense debate over whether the deal was successfully handled.

The Dublin meeting, an informal gathering at which no decisions are expected, will also examine the deepening problems in Slovenia and debate how to press ahead with a fully fledged "banking union'' across the eurozone countries and wider EU.

In the long-run, it is the banking union debate that is most critical since it touches on issues such as how to resolve bad banks, how to put in place a single deposit-guarantee scheme and how to establish a single resolution fund.

In June last year, EU leaders agreed that establishing a banking union was an essential next step in breaking the "doom loop'' between big, problem banks and indebted sovereign governments, so as to avoid one dragging the other down.

But momentum towards banking union has slackened, especially among some German officials, as the complexities and potential difficulties of the plan have come into clearer focus.

Although no formal decisions will be taken at the meeting, ministers are expected to give their endorsement to extending by seven years the time that Ireland and Portugal get to repay loans they have already received from the bailout funds.

This would be a significant concession to Ireland, helping to seal its return to normal borrowing on markets, as well a boost to Portugal as it struggles to push through spending cuts.