Welcome to the first edition of tax haven economic diversification watch. This occasional series is based on the assumption that the less a tax haven depends on its financial sector economically, the greater the political chances are of transparency reforms succeeding.
An article on wort.lu indicates that Luxembourg’s growing internet startup scene may be taking small steps in the direction of providing an alternative to finance. Its first sentence is also surprisingly critical:
“The reputation of Luxembourg abroad is haunted by the country’s financial centre and infamous tax regime, but a growing community of entrepreneurs is turning the Grand Duchy into a start-up hub, and it’s only just the beginning of the ecosystem.”
The article goes on to describe some of the components of the startup ecosystem in Luxembourg, including a crowdfunding platform and support from private sector associations.
The founder of a startup incubator is quoted saying that Luxembourg has an image problem in that it is identified as a financial centre, which makes it difficult to attract young entrepreneurs and developers from abroad.
Luxembourg has a long way to go before it weans itself off its banking dependence, however. Wort.lu also covers a new report on the banking sector by KPMG, which shows a net rise of six new banks opening in Luxembourg in 2013, bringing the total to 147.
The Luxembourg banking association in 2010 calculated that the financial sector contributes 38% of the value added (direct and indirect) in the local economy. Luxembourg – population 530.000 – is ranked 2nd on the Financial Secrecy Index.