Austria joins Luxembourg for EU bank secrecy talks

Tue Apr 9, 2013 10:36am EDT
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By Michael Shields and Marc Jones

VIENNA/LONDON (Reuters) - Austria will join Luxembourg for talks with the European Union on how to crack down on cross-border tax cheats, Chancellor Werner Faymann said on Tuesday, signaling an easing of Vienna's hardline stance on coveted bank secrecy.

Faymann, a Social Democrat, stressed that Austrians' domestic bank accounts would remain shielded from the taxman's prying eye, but foreigners' wealth in local banks could face unprecedented scrutiny if the talks with Brussels go well.

As momentum for tax talks grew, Luxembourg Finance Minister Luc Frieden said his country may end its bank secrecy rules by automatically handing over details of account holders to other EU states.

The moves mark a U-turn for the two countries that for years refused to share personal data on savers with fellow EU members. They instead get banks to withhold tax on EU citizens' interest income and give the money anonymously to home countries.

But with austerity-minded EU peers keen to collect more tax revenue from citizens' offshore wealth, the model has come under heavy pressure. This has grown since last month's bailout of Cyprus, whose oversized banking system had gorged on foreign funds attracted by low taxes and easy regulation.

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.

Faymann took the plunge on Tuesday, portraying the move as a way to protect Austria's reputation and help to catch foreign fraudsters while preserving his compatriots' privacy.

"We are trying to find an appropriate form of combating tax fraud more strongly than before. We will conduct talks together with Luxembourg," he told reporters after a cabinet meeting.   Continued...

Austria's Chancellor Werner Faymann arrives at the European Union (EU) council headquarters for an EU leaders summit in Brussels March 14, 2013. REUTERS/Laurent Dubrule