French President Francois Hollande addresses the media at the end of the first day of a two-day EU summit in Brussels on Thursday, March 20, 2014. The EU Commission president wants a two-day summit of European Union leaders to center on boosting the fledgling government in Kiev rather than focus exclusively on sanctions against Russia over its annexation of Ukraine’s Crimea peninsula. (AP Photo/Yves Logghe)
BRUSSELS (AP) — European Union nations on Thursday agreed on a sweeping policy to fight tax evasion after tiny Luxembourg dropped its reservations to new rules which render its secretive banking culture more transparent.
Luxembourg [auth] Prime Minister Xavier Bettel confirmed at Thursday’s summit of EU leaders “the willingness of the government to take that road,” a key step to scrap the banking secrecy for foreigners.
EU President Herman Van Rompuy said the move was “indispensable for enabling the member states to better clamp down on tax fraud and tax evasion.”
“Banking secrecy is set to die,” Van Rompuy said.
The legislation proposes an EU-wide automatic exchange of data on bank deposits to allow governments to identify and pursue tax evaders with foreign accounts on home soil. Van Rompuy said it would “close down loopholes, promote automatic information exchange to bring in tranparency.”
The Grand Duchy of Luxembourg was long seen as a paradise for tax evasion because of slack regulation, lax taxes and its famed secrecy that drew everyone from Belgian dentists to international investors looking for ways to launder money. Austria too long was a recalcitrant holdout.
Even with a population of about 500,000 citizens, Luxembourg turned into one of the wealthiest nations in the world because it could rely on a banking and financial industry which has more than 3 trillion euros ($4 trillion) in assets.
“We have reached a new stage on the exchange of information today,” Bettel said, reflecting on years of negotiations on making European banking more transparent and fraud-free.
“We talked about this for 15 years,” French President Francois Hollande said. “But in the end, all the EU nations will face the same rules … and the impossibility to evade taxes.”
Luxembourg long resisted change because it wanted non-EU banking nations like Switzerland and Liechtenstein to also sign up.
“This is a clear message that Europe is fully committed to the new single global standard for automatic exchange of tax information,” Van Rompuy said.