EU nations agree on rules to fight tax evasion
European Union members have agreed on a sweeping policy to fight tax evasion after Luxembourg dropped its reservations to rules that render its secretive banking culture more transparent.
Luxembourg Prime Minister Xavier Bettel confirmed at Thursday's summit of EU leaders "the willingness of the government to take that road", a key step to scrap the banking secrecy for foreigners.
EU president Herman Van Rompuy said the move was "indispensable for enabling the member states to better clamp down on tax fraud and tax evasion".
Van Rompuy added: "Banking secrecy is set to die."
The legislation proposes an EU-wide automatic exchange of data on bank deposits to allow governments to identify and pursue tax evaders with foreign accounts on home soil. Van Rompuy said it would "close down loopholes, promote automatic information exchange to bring in transparency".
Luxembourg was long seen as a paradise for tax evasion because of slack regulation, lax taxes and its famed secrecy that drew everyone from Belgian dentists to international investors looking for ways to launder money. Austria had also been a holdout.
Luxembourg, with just 500,000 people, turned into one of the world's wealthiest nations from its reliance on a banking and financial industry that has more than €3 trillion (HK$32.2 trillion) in assets.
"We have reached a new stage on the exchange of information today," Bettel said, reflecting on years of negotiations on making European banking more transparent and fraud-free.
French President Francois Hollande said: "We talked about this for 15 years. But in the end, all the EU nations will face the same rules ... and the impossibility to evade taxes."
Luxembourg had long resisted change because it wanted non-EU banking nations like Switzerland and Liechtenstein to also sign up.
"This is a clear message that Europe is fully committed to the new single global standard for automatic exchange of tax information," Van Rompuy said.