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Tax Haven Blacklist

df/sp/th/dpa/afpMarch 9, 2009

Germany's Finance Minister Peer Steinbrueck welcomed the debate which is raging around banking secrecy in Europe. It's time for Switzerland, Austria and Luxembourg to offer more transparency, he said.

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Man carrying suitcase full of money
Europe and the US want banking transparencyImage: BilderBox

Germany has been leading international efforts to put pressure on tax havens and bank secrecy nations. Steinbrueck said he's surprised, but pleased, with the discussions that have sprung up over the issue.

"I'm delighted to see how much momentum this debate has got going" in recent months, he told journalists on Monday, March 9, as he arrived for a meeting with his euro zone counterparts in Brussels.

"These tax havens are also places where unregulated financial market deals are made. Who would have thought a year and a half ago that there would be so much momentum going now" for a clampdown, he said.

High on the agenda

safe deposit box painted in colours of the Swiss flag, with key inserted in an open door
Switzerland cooperates with tax fraud investigations, but will not lift veil on secrecy lawsImage: picture-alliance / ZB / DW-Montage

The topic of banking secrecy is on the agenda at an upcoming Group of 20 (G20) meeting of leading economic powers, which will be held in London in early April. The Organization for Economic Cooperation and Development (OECD) is preparing a blacklist of tax havens ahead of the G20 meeting.

Luxembourg's treasury and budget minister Luc Frieden denied that the three countries are tax havens at a meeting of finance ministers in his country on Sunday, March 9.

Client confidentiality and protecting account information is "neither the cause of nor the solution for the international financial crisis," he said.

Deny being "tax havens"

The G20 finance ministers meeting will be followed by an April summit of the heads of state in London. None of the three countries are members of the G20, but Frieden and his counterparts-- Switzerland's Hans-Rudolf Merz and Josef Proell, who is also Austria's vice-chancellor-- called on European Union members among the group to include them in the deliberations.

"One cannot take such far-reaching decisions over the heads of the affected countries," said Proell.

symbol of international financial crisis to be convened by G-20 nations
"Tax haven" countries ask to be included in G-20 finance summitImage: AP

Under current laws, EU countries are required to share client data about savings accounts held by their citizens with other member states. However Austria, Luxembourg and Belgium are exempt from the rule and instead withhold taxes on interest income in accounts held by foreign nationals without revealing their identities to European fiscal authorities. Since taxes are withheld, the three EU countries argue that their countries are not "tax havens."

Switzerland on the other hand is not a member state of the European Union, but does provide foreign countries with judicial assistance in cases of tax and criminal fraud, said Merz, who is both the Swiss finance minister and President.

Swiss bank UBS under pressure from US and EU

The Alpine country has come under strong pressure from both major European countries and the United States to yield on its banking secrecy rules.

Last month Swiss bank UBS turned over data on some 300 of its clients to the US Treasury and paid off a $780 million (618 million euros) fine to settle a case on abetting tax fraud. In a separate lawsuit, the US government is forcing UBS's hand in disclosing the identities of another 52,000 American clients who are under investigation for tax evasion.

Swiss bank UBS building in Zürich
Swiss bank UBS turned over data on some 300 US clients alreadyImage: picture-alliance/ dpa

Last week, France and Germany proposed that G20 members punish countries deemed to be "uncooperative" by breaking off bilateral fiscal conventions. Countries such as Switzerland, Austria and Luxembourg have shown an increased willingness to cooperate with the US and the EU in combating tax fraud, but insist they will not cave in to pressure to otherwise disclose confidential client information.

"We are ready to have a dialogue to find joint ways of stepping up the fight against tax fraud," said Luxembourg's Frieden.

Czech minister defends Switzerland

At the Sunday ministers meeting, the Czech foreign minister Karel Schwarzenberg defended Switzerland against EU threats to clamp down on its banking practices, saying that a nation's sovereignty is "worth more" than lost taxes.

"Certainly tax coffers here and there miss out on a couple of million euros... The independence of a country and the traditions of an independent, neutral Switzerland is however worth more than that," said Schwarzenberg, whose country hold the current six-month EU presidency.

"Why must one spoil that at all cost?" he added in an interview with the Switzerland's NZZ am Sonntag.

Swiss Justice Minister Eveline Widmer-Schlumpf told the Sunday newspaper that the United States "did not keep to playing rules" by seeking disclosure of those names.

US "fishing expedition" for alleged tax evaders

"The US has now started a fishing expedition by demanding the 52,000 client data. That goes against constitutional principles. I have reflected this to my American colleague... We view this as an attack on Switzerland," she said.

In a separate meeting of foreign ministers on Friday in which she met with her US counterpart Hillary Clinton, Swiss foreign minister Micheline Calmy-Rey said at a press conference, "It is very hard for Switzerland to accept such pressure on UBS," which is "an indirect pressure on the Swiss authorities."

Calmy-Rey warned: "difficulties at UBS could weaken the international finance system."