Luxembourg plans to lift bank secrecy rules for European Union citizens who have savings based in the country, the Prime Minister announced yesterday, marking a sharp shift in policy that will take effect from 2015.
The move would bring Luxembourg into line with all other EU countries bar Austria in sharing information within the European Union about bank depositors in its territory. The decision adds to pressure on Vienna to fall into line, after Austria’s Chancellor said on Tuesday it would join talks on the subject.
Luxembourg’s decision follows lobbying by Germany and the European Commission, bolstered by the case of former French Budget Minister Jerome Cahuzac, who is under investigation for fraud after admitting lying about having a Swiss bank account.
“We can, without great damage, introduce automatic exchange of information as of January 1, 2015,” Prime Minister Jean-Claude Juncker told parliament in a state-of-the-nation address.
“We are following a global movement... we are not caving in to German pressure,” he said, adding that 25 EU countries as well as the United States wanted such data-sharing.
Germany said on Tuesday that the EU’s five largest economies – Germany, France, Britain, Italy and Spain – had agreed to deepen cooperation on tackling tax evasion.
Mr Juncker’s announcement ends decades of bank secrecy in Luxembourg, which helped the country establish what is now one of the biggest financial centres in Europe and to make its citizens the region’s wealthiest in terms of per-capita income.
Luxembourg, with a banking industry roughly 22 times the size of its economy and with deposits 10 times its GDP, has come under heavy pressure to change in recent weeks.
The losses imposed on uninsured deposit holders in the bailout of Cyprus underscored the weak bargaining position of smaller EU states should they run into difficulty. Cyprus’s financial sector, swollen with foreign funds lured by low taxes and light regulation, also dwarfed the island’s economy.
Germany’s Finance Minister Wolfgang Schaeuble welcomed Luxembourg’s move. He said: “This is truly no small step for Luxembourg and it deserves our respect. We will not wait until every last Caribbean island has changed its behaviour but with a broad international approach we will be successful.”