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Luxembourg, Austria Sanction EU Negotiating Mandate

by Ulrika Lomas,, Brussels

20 May 2013

Luxembourg's Finance Minister Luc Frieden has confirmed that Luxembourg and Austria are included in the mandate allowing the European Commission to negotiate an automatic exchange of information with five third states.

Both countries lifted their opposition to discussions between the European Commission and Switzerland, Liechtenstein, Andorra, Monaco and San Marino during the latest European Union (EU) Economic and Financial Affairs Council (ECOFIN) meeting in Brussels.

According to Frieden, Luxembourg and Austria have also agreed that the draft revised Savings Tax Directive should serve as a basis for the negotiations, despite the fact that the text has not yet been formally approved. Upon conclusion of the negotiations, the ECOFIN Council can then formally adopt the directive, to ensure a level playing field with the five states in question, Frieden explained.

The Luxembourg Minister alluded to the pilot scheme proposed by Spain, the UK, Germany, France, and Italy, for the multilateral exchange of tax information between the participating countries, based on the Foreign Account Tax Compliance Act (FATCA) model. Here, Frieden emphasized that the Grand Duchy of Luxembourg shares the political objective of developing a "coherent system of automatic exchange," applied on as large a geographical scale as possible.

Finally, Finance Minister Frieden announced plans to sign an OECD accord on mutual administrative assistance in tax matters, in Paris at the end of May.

In his address to the ECOFIN Council, Frieden insisted that Luxembourg has always attached great importance to the fight against tax evasion and tax avoidance. While making clear that the withholding tax system is still, in his opinion, the most efficient means with which to achieve this objective, Frieden highlighted Luxembourg's decision to take into account recent international developments, indicating that the automatic exchange of information is now the international standard for combating tax fraud.

In order for this standard to be applied effectively, it is vital to ensure a large geographical application of the mechanism, to safeguard the competitiveness of the European economy, Frieden warned. It is essential to guarantee a level playing field between the key financial centers both in Europe and in the world, hence the importance of this reference in the latest G20 communiqué, Frieden stressed.

The Swiss State Secretariat for International Financial Matters (SIF) has already indicated that Bern has taken note of the negotiating mandate. The Federal Council aims to respond once it has examined a concrete request for Switzerland to extend the Savings Tax Directive, the SIF stated.

The Swiss Bankers Association (SBA) underscored that it would welcome an agreement, to improve access for Swiss financial institutions to the European market in the medium-term. Switzerland will only be able to accept measures that are equivalent to internal European regulations, however, the SBA pointed out.

TAGS: compliance | Finance | tax | investment | European Commission | tax compliance | tax avoidance | FATCA | Organisation for Economic Co-operation and Development (OECD) | Liechtenstein | Luxembourg | Monaco | agreements | withholding tax | Austria | France | Germany | Italy | Spain | Switzerland | G20 | regulation | mutual assistance agreement | European Union (EU) | Andorra | San Marino | Compliance | Europe

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