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EU Internal conflicts: Austria opposes EU anti-tax evasion plans.

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The European Commission published draft proposals on Monday (2 February) that aim to reduce tax evasion throughout the EU by improving information exchange between its member states.

If implemented, the new measures would prevent members from invoking banking secrecy rules as a reason for refusing to disclose client information.

Austria feels the new proposals will undermine its banking competitiveness .

However, Austria reacted angrily to the new proposals, saying they would greatly reduce its competitiveness when dealing with banking rivals Switzerland and Liechtenstein, both of whom are not members of the EU.

"Abandoning banking secrecy by itself makes no sense. We are against a unilateral solution which will hurt Austria," said Harald Waiglein, spokesman for the country's ministry of finance.

The commission proposals contain measures to boost co-operation between member-state tax authorities in identifying and recovering unpaid taxes.

"The effects of the economic and financial crisis make it particularly timely," said taxation commissioner Laszlo Kovacs.

"We are not asking member states to eliminate bank secrecy as such, but we want to eliminate its potential abuse," he continued.

Current EU arrangements for mutual assistance between member states date back to the mid Protected content and are felt by the commission to be severely outdated in today's climate of increased capital mobility.

The new measures are wide in scope and would deal with all taxes except those already covered by EU legislation – namely VAT and excise duties.

Taxation sovereignty

Taxation is a sensitive area for many member states, who feel it should remain the preserve of national governments.

The potential loss of the government's right to set low corporate taxation was cited by the Libertas campaign group as a reason for opposing the Lisbon Treaty in last year's Irish , despite the lack of any such provision in the reforming document.

EU taxation is currently an area that requires unanimous approval by all 27 member states in the Council of Ministers.

If approved, national governments would have to ensure their banks responded to requests for information from tax authorities in other member states.

Mr Kovacs stressed that the new directives would not undermine member state taxation sovereignty when dealing with their own citizens, however.

"This would relate to bank secrecy regarding residents of other member states so it will not have any effect on the relationship between tax authorities of Austria and Austrian residents," said Mr Kovacs, responding to a question concerning the Alpine member state.

Austria is amongst a trio of countries, alongside Luxembourg and Belgium, where bank-information exchange with other EU member states is limited.

"It is about the sovereignty of other member states who want to apply their tax legislation on their own citizens," said Mr Kovacs.

He said he expected the new proposals to be adopted by the council by the end of the year.

Tax havens

Commissioner Kovacs also said the directives would strengthen the EU's hand when dealing with non-co-operative tax havens.

In the past, such havens have frequently pointed to the lack of a uniform policy within the EU when refusing to share information.

A large tax evasion scandal broke out in Germany last year when a number of wealthy citizens with bank accounts in Liechtenstein were discovered to be evading tax.

© Protected content . All rights reserved. Printed on 03.02.2009.