In Europe, widening probe targets tax haven
Some 10 countries are investigating suspects, including the US, which estimates that it loses up to $100 billion a year in unpaid taxes.
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Perez-Navarro adds that individuals should have the right to a certain banking confidentiality, but that when investigators want to see numbers they should be handed over. "It's all about establishing a balance between the individual right to privacy and the law-enforcement need for information," she says.Skip to next paragraph
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How tax evasion is being tackled
Countries such as Liechtenstein, Luxembourg, and Switzerland have long cited their banking secrecy laws to avoid tackling tax evasion, say experts. The three nations "cooperate on any other crime: drugs, traffic violation, prostitution, weapons dealing, everything," says Caspar Von Hausenschild, a former banker who sits on the board of the German branch of Transparency International. "But there is no cooperation on tax evasion and tax avoidance. This is a scandal that's been discussed in Brussels over the last 20 years, but finance officials have never been able to close any loopholes."
In recent weeks, German Chancellor Angela Merkel has met with Prime Minister Otmar Haslar of Liechtenstein and Prince Albert of Monaco, demanding they overhaul their banking sectors and begin complying with European tax disclosure requirements. German officials are also lobbying the EU to rewrite tax-evasion legislation to target countries with strict banking-secrecy laws.
"I think that these countries, and that includes Luxembourg, with a scandal like Liechtenstein, will probably come under somewhat more pressure to abolish their bank secrecy rules," says Frederic Feyten, a tax expert at the law firm of Oostvogels Pfister Feyten in Luxembourg.
Mr. Feyten also says Brussels should recast its 2005 savings tax directive, which requires EU countries to report foreign money in their bank accounts. Austria and Luxembourg, and non-EU Switzerland, have a special agreement whereby they don't disclose account holders in exchange for charging them a withholding tax – now 25 percent – which would be split between the country where the account is held and the country where the account holder is from. Liechtenstein also charges a withholding tax, but doesn't share that revenue.
European finance ministers earlier this month also backed calls for reform. Austria and Luxembourg resisted.
John Christensen, director of TJN and former economic adviser to the government in the reforming tax haven of Jersey, says the tax directive generates only small change. The problem, he says, is that wealthy individuals who bank offshore do not open easily traceable accounts.
"They'll set up ... a trust in Luxembourg that owns a company registered in Jersey that has a bank account in the Cayman Islands," he says. "The EU Savings directive will not catch that."
Germany is also considering its own unilateral action against tax havens, such as new regulations requiring German banks to declare wire transfers received from Liechtenstein and a surcharge on those transfers. "That's quite a penalty which would deter legitimate and illegitimate business, but Germany may feel a blunt instrument is necessary to deal with an uncooperative tax haven," says the OECD's Perez-Navarro.