Hollande seeks to vanquish global tax havens Luxembourg to ease bank secrecy
FRENCH banks must give more details on their operations in tax havens, while ministers will disclose personal assets from next Monday, President Francois Hollande said in a drive to restore public trust after a tax fraud scandal.
Seeking to show he is improving transparency after his budget minister quit over a secret Swiss bank account, Mr Hollande pledged to step up the fight against tax havens. He also appointed a specialised financial prosecution office.
“For the sake of the French people, we aim to ensure that those who govern them, those they have elected ... are not getting richer in the course of their mandate,” Mr Hollande told a news conference yesterday.
He spoke as neighbouring Luxembourg’s Prime Minister JeanClaude Juncker announced plans to lift bank secrecy rules from 2015 for European Union (EU) citizens who have savings there, bringing it into line with other EU countries.
Former budget minister Jerome Cahuzac stunned France last week by acknowledging, a fortnight after quitting his post amid allegations of tax fraud, that his denials of holding a secret foreign bank account had been lies.
His resignation came as a major embarrassment for Mr Hollande, who had promised to uphold high moral standards in public life while in office. His approval rating is at record lows as unemployment rages near a 15-year high.
To improve the fight against tax fraud, the banks will have to make public each year a list of their subsidiaries, along with their activities, staff and turnover, tax paid and any government aid.
“In other words it won’t be possible for a bank to hide transactions carried out in a tax haven,” Mr Hollande said.
French banks including BNP Paribas and Societe Generale publish the names, ownership interest and locations of units in all markets, including low-tax administrations such as Bermuda, Luxembourg and Jersey. Moreover, a draft bank reform law already asks banks to report revenues and staff on a country-by-country basis, which bank executives say puts them at a disadvantage. There are some exceptions. Special purpose vehicles, entities created to fund securitisation deals, are off-balance-sheet and not consolidated by the banks, and therefore not declared.
“There is still a question mark on what these measures will apply to,” said lawyer Hubert de Vauplane, a partner at Kramer Levin Naftalis & Frankel, noting Mr Hollande’s announcement was sufficiently vague to avoid any kind of real change to existing loopholes.
Opposition legislators talked of “diversionary tactics” and kept pressing for more action. Reuters LUXEMBOURG will ease its bank secrecy rules from 2015, allowing other European Union (EU) member states and the US access to depositors’ account details amid mounting pressure to crack down on tax evasion in Europe.
Austria, which like Luxembourg has long resisted the idea of automatically exchanging information about depositors, is also preparing to ease longstanding and controversial bank secrecy rules.
Tax havens have come under increasing scrutiny after millions of bank records were leaked last week exposing the identities of thousands of tax evaders around the world.
It also follows the admission by Jérôme Cahuzac, until last month France’s budget minister, that he had lied about holding a secret bank account in Switzerland, a revelation that has damaged François Hollande’s presidency.
Luxembourg Prime Minister Jean-Claude Juncker said the Grand Duchy’s financial sector was ready to co-operate with international tax authorities in Europe and the US.
“We can, without great damage, introduce automatic exchange of information as of January 1 2015,” he told Luxembourg’s parliament in a state of the nation address.
“We are following a global movement … we are not caving in to German pressure,” he said, according to Reuters, adding that 25 EU countries as well as the US wanted such data sharing. “Luckily, our financial sector has subscribed to a resolute ‘white money’ strategy. Our financial sector doesn’t live off black money and tax evasion.”
Meanwhile, Austrian Chancellor Werner Faymann said on Tuesday the country was ready to talk about providing details on EU citizens with offshore accounts in the country, although he insisted details about Austrian depositors would remain private. “We are prepared to negotiate about automatic data exchange concerning the accounts of foreigners in Austria that has been requested by the EU,” he said.
Until now, said Mr Faymann, Austria had provided data only when there was evidence of wrongdoing. “That is too little. We need to act faster and more aggressively in the fight against tax fraud.”
Austria and Luxembourg are the only countries among the bloc’s 27 member states that have refused automatic exchange of information about depositors. They are now seeking to protect the reputation of their financial service sectors by indicating their willingness to be more open over depositor information.
“I very much welcome Luxembourg’s new openness to automatic exchange of information, even if it is long overdue,” said Algirdas Šemeta, EU commissioner for taxation.
The moves come as Europe’s five largest economies reached a deal on Tuesday to further strengthen cooperation over fighting tax evasion. The UK, France, Germany, Italy and Spain will expand information exchange, which is currently limited to deposits.
German Finance Minister Wolfgang Schäuble said agreement on common EU standards for data exchange to curb tax evasion would be an “important theme” at the spring meeting of the International Monetary Fund in Washington.
However, it was taking a long time to negotiate. “It is sometimes very heavy going,” he said after a meeting with new US Treasury Secretary Jack Lew.
Mr Lew said both the US and Germany had a common interest in ensuring transparency and making sure that tax laws were obeyed.
It remains unclear, however, to what extent Austria and Luxembourg are willing to open access to depositors’ account details.
Austrian Finance Minister Maria Fekter, who hails from the centreright People’s Party, said on Sunday she would “fight like a lion” to preserve bank secrecy rules. “In our constitution, privacy and data protection get very high priority,” she said. Financial Times