Luxembourg Prime Minister Jean-Claude Juncker has suggested that US President
Barack Obama should look to the 'tax havens' in his own back yard before telling
the financial centres of Europe and elsewhere how they should be running their
affairs.
In a speech to the European Parliament on March 31, Juncker implied that it
was hypocritical of Obama and other world leaders such as UK Prime Minister
Gordon Brown to moralise over banking secrecy laws in the likes of Luxembourg,
Switzerland and Austria when it is still possible to set up companies in certain
low- or no-tax US states and provide the minimum of information to the authorities
about the ownership of the company.
Juncker argued that if countries like Luxembourg are facing the prospect of
being 'blacklisted' for their privacy laws, then so should the United States.
"The G20 has no credibility as an undertaking if Delaware, Wyoming or
Nevada or far-flung islands from the United States are not on the blacklist,"
he told MEPs, adding: "If there must be a blacklist then, America should
have its place on it."
Juncker said that by the end of the G-20 conference in London on April 3, it will be
possible to discern whether the US, the UK et al would have found a "real
solution" to the problems of regulating that world's financial system -
one which includes the United States - or whether Obama and Brown are merely posturing and
playing to the "public gallery" with their anti-tax haven rhetoric.
Nearly two million corporations and limited liability companies are formed
within the United states each year, but in many cases US states form these corporations
without asking for the identity of the corporation’s beneficial owners,
and this can make life difficult for law enforcement agencies when investigating
allegations of financial and other crimes.
A recent bill introduced into the US Senate would require state authorities
to obtain beneficial ownership information for the corporations formed under
their laws and to provide access to this information to law enforcement bodies
upon receipt of a subpoena or summons. A similar bill introduced last year was
co-sponsored by President Obama when he was a member of the Senate.
Michigan Democrat Senator Carl Levin, who also supports the crackdown on offshore financial centres
and has introduced a bill which attempts to neutralise banking secrecy, has
been pursuing this issue since 2000, when a Government Accountability Office investigation
found that just one individual had been able to set up over 2,000 Delaware companies and move USD1.4bn through company bank accounts.
The United states has drawn criticism from the Financial Action Task Force (FATF)
for its failure to comply with certain standards on the reporting of beneficial
ownership which the FATF warns could undermine attempts to thwart money laundering. It urged
the United States to correct this deficiency by July 2008.
For its part, Luxembourg, in an attempt to ensure it is omitted from any blacklist,
announced on March 13 that it intends to conclude more double tax treaties to
the benchmarks set by the OECD, thereby increasing exchange of information channels
in cases where fiscal crime is alleged to have taken place.
However, a government statement announcing the decision also pointed out that
OECD rules do not cover banking secrecy, and therefore Luxembourg will
maintain this "in order to maintain its depositors’ privacy.”
Luxembourg has already established a double tax treaty network covering more
than 50 countries, all following the OECD Model Tax Convention, although the treaty with
the US contains 'Savings' and 'Limitation of Benefits' clauses which can negate
the purpose of the treaty in some circumstances.
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