‘Chance’ of agreement on increased tax co-operation

Austria may drop its opposition to tax deal and Spain wants approval of anti-fraud agreement.

Diplomats are optimistic that finance ministers will agree on a set of laws to increase member state co-operation against tax evasion at a meeting on 19 January. The Spanish presidency of the Council of Ministers is seeking rapid agreement on the legislation.

Resistance from Austria and Luxembourg, with their strong traditions of banking secrecy, held up agreement until now. Their concerns focus on the competitive disadvantage their financial centres could face against Switzerland, Liechtenstein and other non-EU countries with light fiscal controls.

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Austria also argued that the legislation was flawed as it would not prevent people from hiding their identity, and escaping tax, by appointing nominee directors to run companies, or by setting up anonymous trusts – practices not allowed in Austria but permissible elsewhere.

But now an Austrian diplomat has said that extensive discussions between governments in December mean that “there is a chance” of agreeing the package. He indicated that Austria could drop its demand for provisions against anonymous trusts and company owners, in exchange for a commitment from other member states to address the issue at a later date.

The package includes a reform to extend the scope of the EU savings tax directive, to require member states to share information not only on the interest that foreigners earn from their bank accounts, but also from investment funds and certain types of life insurance contracts and securities.

Data sharing

Another part of the package would prevent member states from using bank secrecy as a justification for not sharing information on salaries, dividends and other sources of income. The new legislation would also increase the data shared automatically rather than only on request. The package also contains a measure to increase mutual legal assistance between member states to recover unpaid tax.

László Kovács, the European commissioner for taxation, has said that reform is needed because existing legislation “can be easily circumvented”.

Elena Salgado, Spain’s finance minister, is expected to discuss the legislation with Jean-Claude Juncker, Luxembourg’s prime minister, during a visit to Luxembourg on Friday (8 January).

The Spanish presidency will also attempt to secure approval at the meeting of an anti-fraud agreement negotiated between the European Commission and Liechtenstein, and the adoption of mandates for the Commission to negotiate similar agreements with Andorra, Monaco, San Marino and Switzerland.

Austria and Luxembourg, however, may still block these steps because they believe the Liechtenstein deal should be renegotiated to place tougher transparency requirements on the principality.

The Spanish presidency will use the meeting to present its work programme in the area of economic and financial affairs. Spain has said that it will prioritise getting agreement between member states on a ten-year strategy (known as EU2020) to boost economic growth and employment, and on brokering a deal with the European Parliament on reforming financial supervision in the EU.