My finance view

European Union-led plans to conclude a number of accords with Liechtenstein and other non- EU countries to fight tax fraud may stumble over resistance from two of the bloc’s smaller members, Luxembourg and Austria.

Sweden, which holds the rotating presidency of the 27- nation EU, seeks to get political backing from the region’s finance ministers meeting in Luxembourg today for several tax- cooperation deals that it says would enhance transparency. Luxembourg today said it will veto such plans because they go against agreements earlier this year that information exchange on tax matters should occur only on a case-by-case basis.

Leaders of the Group of 20 nations have agreed to clamp down on countries that don’t comply with global tax standards as part of efforts to battle the economic crisis. At the behest of the G-20, the Organization for Economic Cooperation and Development published a “gray list” that identified Austria, Luxembourg and Belgium, among others, as countries that haven’t implemented internationally agreed tax standards.

“At the G-20 meeting, it was agreed that there should be information exchange upon request in Europe,” Luxembourg Finance Minister Luc Frieden told reporters today before the ministers’ meeting. “What’s on the agenda today, however, would mean automatic information exchange for Austria, Belgium and Luxembourg. We think this is not the right way.”

Austria’s Finance Ministry said yesterday that the country would veto any deal that would force the country to join a system of automatic exchange of tax information while failing to shed light on anonymous trusts. Sweden said it seeks political agreement to sign an EU treaty with Liechtenstein and also to get backing for similar EU accords with Andorra, Monaco, San Marino and Switzerland.

‘Full Transparency’

“We need full transparency also as regards financial products to prevent individual states from hiding behind certain products — even while agreeing to information exchange — by saying there are products where we have no information about who the owner is and who is the beneficiary,” Austrian Finance Minister Josef Proell said today before the meeting.

Luxembourg is in favor of fighting tax fraud, “but we’re not in favor of having two different systems inside and outside Europe,” Frieden said in Luxembourg. “That’s why we will contribute constructively to today’s discussion, but we won’t agree to the proposed treaties with Liechtenstein and the mandates for negotiations with other countries.”

Luxembourg, Austria and Belgium have been taken off the OECD gray list after their governments signed a series of bilateral double-tax treaties in line with G-20 demands.

“We have to adhere to the conclusions of the Group of 20 nations, which concluded that information exchange should happen on request,” not automatically, Frieden said. “We can’t now say that the G-20 was wrong and we have to change the rules of the game.”

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