According to an article on wort.lu, ending banking secrecy in Luxembourg could cost more than 2000 jobs.
“Luxembourg may have won support from fiscal authorities abroad for its decision to approve the automatic exchange of bank information on non-residents in 2015.
The Washington Post reports that Luxembourg has again blocked an EU law against tax evasion.
“European Union finance ministers failed once again Tuesday to agree on a sweeping new policy to fight tax evasion because of resistance from Luxembourg, a tiny country that long has prospered from a secretive banking culture.”
Liechtenstein’s approach to the OECD’s Automatic Information Exchange standard seems to be driven by realpolitik, based on an article on the Vaterland.li site:
“The end of bank secrecy is in sight. The OECD has swiftly produced a standard for automatic information exchange, which should stem the flow of cross-border tax evasion.”
“Liechtenstein’s government, closely watched internationally, declared last November it would admit automatic information exchange.”
The director of the Liechtenstein bank association is quoted saying: “The positive repercussions, especially among international partners, underline that this was the right decision.”
The article concludes:
“By admitting a future information exchange standard, Liechtenstein is able to shape the standard and promote its own interests. The government has already been able to take part in the development of the OECD standards which were presented today in Sydney.”
Meanwhile, a short article in the Luxembourg Tageblatt says that the finance ministers of Luxembourg and Switzerland met in Bern last Thursday (Feb 20th). “On one issue, [the ministers] shared the same opinion: that Automatic Information Exchange needs a global solution.”
Please see the Tax Justice Network’s analysis on Automatic Information Exchange here and here: when secrecy jurisdictions say “global solution” what they really mean is “get lost”.
(original news articles in German, translation with some help from google)
De Telegraaf reports that Dutch zwartspaarder (“black savers”) are in trouble:
“Clients who for decades were received by UBS in Switzerland and Luxembourg with open arms to stash their money out of sight of the taxman have received their marching orders”.
The article says that the bank has been having “conversations” with clients, informing them that they can either withdraw their money in cash, or contact an advisor to enter a voluntary disclosure scheme with the Dutch tax authorities. “UBS even threatens to turn clients in if they do not cooperate” says a tax specialist quoted in the article who claims to have heard the same story from several lawyers dealing with “heavily shaken” clients.
The main problem seems to be that cash withdrawals from these accounts will be limited to 50.000 euros a year. The tax specialist says that for most savers this maximum is “completely unworkable” as it would take them many years to take their wealth out of the bank at that rate.
There are days when it’s not so easy to find relevant articles in secrecy jurisdiction media.
On those days, I turn to Luxembourg.
Less than a week after Luxembourg, together with Austria, blocked EU attempts to increase transparency in tax reporting, Luxembourg Foreign Minister Jean Asselborn has given an interview in which he asks Germany to show more “solidarity for the needs of others”.
“In an interview with German newspaper “Stuttgarter Nachrichten” the Foreign Minister reportedly said that the European Union should not be identified with “social coldness or the cutback of social services and the reduction of jobs.””
Tageblatt.lu also covers Asselborn’s remarks. Based on the first reader comments below the article, it seems that he is trying to shift the focus towards Greece, Spain, France, Portugal and Cyprus – “solidarity” in this context is some sort of code for “let’s talk about those debt-ridden over-spenders” – and away from Luxembourg’s role in enabling tax abuses within the EU.
During a presentation of his government’s programme last week, despite mentions of diversifying the Luxembourg economy into new activities such as ICT and biotechnology, Prime Minister Bettel said that a “tax-friendly environment will be maintained for UCITS, SICARs and SIFs and there will be no wealth or inheritance tax”. Or as wort.lu put it: “the new government will not bite off the hand that feeds it.”
UCITs, SICARS and SIFs are investment vehicles: The SICAR, for example, is promoted by EY as “Luxembourg’s tailormade structure for the Private Equity Fund Industry” with “tax neutrality designed to suit different investors’ needs”.
And in other news, wort.lu covers the jailing of the former head of Kaupthing bank for fraud:
“Three former directors of the collapsed Icelandic bank Kaupthing and its Luxembourg subsidiary were convicted for fraud by a Reykjavik court Thursday and sentenced to between three a half and five and half years in prison.”
“The three men were convicted for hiding the fact that a Qatari investor used money loaned from Kaupthing to buy a 5.1 percent stake in the bank right in the middle of the 2008 financial crisis.”
“…the former head of its Luxembourg subsidiary, Magnus Gumundsson – who played a key role in granting the loan – was given a three-and-a-half-year sentence.”
The BBC’s coverage notes that shell companies in the British Virgin Islands and Cyprus were used to carry out the Kaupthing fraud. (hat tip: Tax Justice Network blog).
This brief article on wort.lu on a seminar organized by the Indian Business Chamber Luxembourg is an example of uncritical reporting by media in secrecy jurisdictions.
Under the innocuous title “Business head calls for flights between Luxembourg and India” the article starts with:
“Launching a direct flight connecting Luxembourg to India was among the proposals made at a seminar on cross-border investments on Wednesday.”
and then continues
“The idea was put forward by international tax expert Stéphane Pellet, a partner at “Etude Felten & Associés” at a seminar organised by the Indian Business Chamber Luxembourg (IBCL).”
The Felten & Associes website lists “bank secrecy” as one of its areas of practice.
The speaker “…highlighted a number of opportunities, which Luxembourg could exploit, namely to position the country as a European hub for currency exchange to be held in rupees.”
“The country’s next goal, he said, should be to compete effectively with countries like Mauritius, through which 43 percent of investment to India is done.”
The article fails to mention that Mauritius is a secrecy jurisdiction, that the high levels of investment into India via Mauritius have been linked to round-tripping by Indian investors, and that recent reports find that Mauritius is being used by global accounting firms such as Deloitte to help multinationals avoid tax in Africa. Deloitte, by the way, is one of the corporate members of the India Business Chamber Luxembourg, together with the rest of the Big 4 accounting firms, as well as major banks and clearing houses.
Luxembourg is ranked 2nd on the 2013 Financial Secrecy Index. The accompanying country report notes that: “The local media only rarely dares speak out against finance or financial secrecy, and numerous examples exist of the repression of alternative views.”
Last Friday the OECD Global Forum rated Luxembourg, the British Virgin Islands, Cyprus and the Seychelles as non-compliant with tax transparency standards.
The Tax Justice Network blog has much more, noting for example that these jurisdictions fell “woefully short” of the OECD’s “rather low standards” while Switzerland “failed even to make it past the first stage of a two-stage assessment”.
How have the media in some of these countries reacted to the report so far? In Luxembourg and the British Virgin Islands, mostly by pointing fingers at other jurisdictions and criticising the OECD. The Swiss coverage also has a strong focus on other countries but is relatively more balanced. A brief overview:
Luxembourg
Wort.lu reports that the Luxembourg Finance Ministry “had delivered a preemptive strike this week, issuing an official statement ahead of the publication of the report by the Global Forum on Transparency and Exchange of Information for Tax Purposes.”
It also says that “Switzerland fared even worse than the Grand Duchy, being found lacking in adequate laws and regulations. Austria and Turkey meanwhile were found to be only partly-compliant with international standards.”
“The British Virgin Islands, like Luxembourg, criticised the report, saying that it had not taken into account recent reform efforts.”
The pre-emptive statement by the Luxembourg finance ministry had said that the score given to Luxembourg was “excessively harsh,” and that Luxembourg had made a “commitment to exchange information effectively”.
“The ministry pointed out that it receives a high volume of requests for information each year. Over a three year period, it received 832 requests of which 785 were complied, a track record which it considers good given the high volume.”
Switzerland
Neue Zürcher Zeitung : Red cards for Luxembourg and Cyprus
“The Global Forum – linked to the OECD – has evaluated the tax cooperation of 50 countries. Switzerland was not graded due to missing prerequisites.”
“Austria had to settle for a “partially compliant” rating.”
“Several jurisdictions with internationally significant finance centres – US, UK, Hong Kong and Singapore – received the grade “largely compliant”.
“The gaps identified by the Global Forum require several changes in legislation, which the Swiss parliament has not yet dealt with. As a result, Switzerland is at the moment in the illustrious company of Panama, Botswana, Liberia, Nauru, the Marshall Islands and eight other jurisdictions which…are not yet ready for the second phase evaluation of the Global Forum.”
A second NZZ article has the headline Switzerland can breathe out:
“In Jakarta the plenary of the 121 members of the Global Forum ended on Friday. The delegation from Bern rated the fact that Switzerland was not explicitly criticised in the yearly report as a success.”
“Ambassador Fabrice Filliez of the Secretariat for International Financial Matters went further, saying that the advances achieved in order to adapt to international standards had been validated.”
“Switzerland was not included in the country ratings published in Jakarta due to its missing legal frameworks. As a result it was less in the spotlight in comparison with Luxembourg, Cyprus, the Virgin Islands or the Seychelles, which received insufficient grades.”
“The pressure on Switzerland will not diminish, however. The Global Forum is counting on gaps in legislation to be amended.”
(translated from the German with some help from google: corrections and suggestions welcome)
Swissinfo.ch: OECD tax forum complains Swiss making slow progress
“Switzerland has still not met international standards on tax transparency, potentially putting investments at risk, a global tax forum warned Friday in Jakarta.”
British Virgin Islands
BVI news: BVI again described as non-compliant, says the classification is inaccurate
“The British Virgin Islands has again been whipped into damage control mode; this time accusing an overseas group of using outdated data to paint a bad picture of its tax information-sharing mechanism.”
“The Global Forum on Transparency and Exchange of Information for Tax Purposes – its ‘Peer Review Report’ – classified the BVI as non-compliant. But the BVI government said the classification is outdated, and does not accurately reflect the current practices in the BVI since mid-2012. The controversial assessment covered the period from June 2009 to July 2012.”
“Speaking from the Sixth Meeting of the Global Forum in Jakarta, BVI Financial Secretary Neil Smith said it is unfortunate that the Global Forum’s classification “misses the mark”.”
“For a more up-to-date view of the territory’s tax sharing advancements, the BVI government has requested that a supplementary review be conducted as soon as possible. It also expressed confidence that the supplementary review will present what it describes as an accurate and compliant rating of the BVI.”
The Wall Street Journal and Bloomberg reported on Friday that Austria and Luxembourg are threatening to block a European Union proposal to curtail bank secrecy and tax evasion. The two countries are pushing for 5 non-EU tax havens – Switzerland, Liechtenstein, Monaco, Andorra and San Marino – to join any tax deal before they agree to sign up.
The Luxembourg coverage on the site wort.lu seems to be mostly picked up from international press agencies. One of the articles notes that “Luxembourg, with an economy heavily dependent on financial facilities for foreigners, argued that the EU should first nail down equivalent deals with several neighbouring tax havens.”
An article in Switzerland’s Tages Anzeiger clarifies that when the Luxembourg and Austrian finance ministers say “third parties” they mostly mean Switzerland. It also notes that “The EU Commission is under time pressure, as the Directive should be in place by the end of the year”.
A Tages Anzeiger column in May this year went into detail about the challenges faced by Switzerland: it has several open negotiation fronts with the EU at the same time and is also under pressure from the G20. In this context, Switzerland’s traditional “cow-trading” style of negotiating with the EU is too risky, and the Anzeiger argues that Switzerland should join forces with Brussels within the OECD to push for a global information exchange system.
The Financial Secrecy Index 2013 (FSI) was launched last Thursday. The Index shows the “yawning gap between G20 rhetoric and reality”: despite some positive developments in the last 2 years, overall “financial secrecy remains alive and well”.
The FSI press release also highlights that “the United Kingdom is the most important global player in the financial secrecy world. While the UK itself ranks only in 21st place, it supports and partly controls a web of secrecy jurisdictions around the world, from Cayman and Bermuda to Jersey and Gibraltar”.
International media outlets which have covered the FSI 2013 include the Economist, Bloomberg, and the Guardian.
Below is a first sample of coverage by secrecy jurisdiction media.
Switzerland (FSI rank: 1)
Neue Zürcher Zeitung: Switzerland in first place
“Switzerland has done much about the issue of bank secrecy in recent years”
“However, it is still in the first position on the Tax Justice Network’s Financial Secrecy Index”
Aargauer Zeitung: Bad transparency marks for Swiss Financial Industry
The second half of the article highlights that the UK is a “hidden number one on the ranking” and also mentions Luxembourg, Hong Kong and Switzerland.
Luxembourg (FSI rank: 2)
Tageblatt.lu: Luxembourg at the top
“Switzerland, Luxembourg and Hong Kong are, according to the estimates of NGOs and religious groups, the biggest shadow financial centres and tax havens in the world”
Wort.lu: Luxembourg called financial secrecy “death star” in Tax Justice Network report
Jean-Jacques Rommes, director of the Luxembourg bankers’ association ABBL contested the results: “The authors of the report are fundamentally of the opinion that we should not have a financial centre bigger than the size of the country. This is what really bothers them,” Rommes commented to the “Luxemburger Wort”.”
“Rommes slammed the Financial Secrecy Index, saying that it is not taken seriously in professional circles. However, he said that it gives Luxembourg bad press internationally and puts pressure on the political sphere.”
“It is harmful and that’s also the intention,” he concluded.”
Germany (FSI rank: 8)
Coverage in the Frankfurter Allgemeine Zeitung and Berliner Zeitung: “Germany is El Dorado for money laundering”
Süddeutsche Zeitung: “Tax Haven Germany”
Tagespiegel: “Germany particularly attractive to tax cheats”
Bermuda (FSI rank: 14th)
The Royal Gazette reports that Finance Minister Bob Richards called the FSI “total nonsense“.
He also said:
“I don’t know of any G8 country that publicly reveals accounts unless they are a public company on the stock exchange. It’s really hypocritical. It’s not required in the US or UK.”
“[Bermuda] had signed almost 40 tax information exchange agreements — including ones with almost all G8 countries and 75 percent of G20 countries.”
“He added Bermuda had also signed up to the OECD/Council of Europe multilateral tax agreement and the US Foreign Account Tax Compliance Act (FACTA).”
Austria (FSI rank: 18)
Krone.at: Austria continues to be among untransparent countries
Ireland (FSI rank: 47)
Irish Times: Ireland a ‘prolific source of tax loopholes’, says transparency watchdog
The subheader notes that “Swiss top ‘secrecy index’ where, despite criticisms, Ireland is among the better states surveyed”
The 2nd half of the article takes the focus away from Ireland and towards other countries, in particular the UK and Germany.
“New Zealand’s international reputation as a transparent and well-regulated financial services centre took another step backwards today with our appearance for the first time on the Financial Secrecy Index,” said Green Party Co-leader Dr Russel Norman.”
“Our secretive foreign trust regime and lax company registration requirements are damaging our international reputation.”
“Dr Norman has also drafted a new law to address the secrecy loopholes that are easily abused in the New Zealand foreign trust regime.
“Transparency is the best remedy to ensure New Zealand foreign trusts are not being misused,” said Dr Norman.”
(Via Wort.lu)
“French lawmakers are set to move against the likes of Amazon Thursday with a bill aimed at supporting small bookstores struggling in the face of giant online retailers, members of parliament said.
The bill, which was crafted by the main opposition right-wing UMP party but also has the support of lawmakers on the left, aims to put an end to what some criticise as unfair competition for traditional bookstores.
It will seek to restrict the likes of Amazon from combining offers of free deliveries with discounts of up to five percent on books, which is allowed under existing French legislation.
Culture Minister Aurelie Filippetti has criticised Amazon’s practices in the past, blasting free deliveries or the firm’s policy of “tax optimisation.”
The American giant reports its European sales through a Luxembourg-based holding company, taking advantage of the Grand Duchy’s relatively low corporation tax rates for earnings outside its borders.
Amazon insists the arrangement, which has been criticised by politicians across Europe, is legal under the European Union’s single market rules.”
Logistical note: I try to post daily, but will be travelling over the next couple of weeks as of today, so posts will be less frequent than usual. Thank you for following Financial Secrecy Media Monitor.
Financial Secrecy Media Monitor 