Luxembourg Set to End Bank Secrecy

    30 October, 2014

    From VOA Learning English, this is the Economics Report.

    European Union finance ministers have reached an agreement that will make it more difficult for tax avoiders to hide their money. The new legislation was approved last week after Luxembourg and Austria agreed to lift their vetoes. Countries known as tax havens had blocked the bank secrecy laws for years.

    The new law means that depositors will no longer be able to hide their money from governments in EU countries like Luxembourg. So says Algirdas Semeta, the EU Commissioner for Taxation.

    Luxembourg Set to End Bank Secrecy
    FILE - Euro currency.

    "The revised directive promises full and lasting tax transparency in Europe. Bank secrecy is dead, and automatic exchange of information will be applied in its widest form."

    Luxembourg agreed to share bank information with member countries starting in 2017. Austria has signaled that it will do the same by 2018.

    Jacob Kirkegaard is a researcher with the Peterson Institute for International Economics. He says the agreement is an important milestone in worldwide efforts to stop tax avoidance.

    "This is a very significant development and it's really the culmination of what at least in the EU has been a decade-long struggle by some governments - in France, Italy and Germany - to really curb this long standing practice of anonymous, offshore, if you like, bank accounts in other EU countries."

    Many years of bank secrecy have helped Luxembourg become one of Europe's main financial centers. Bank deposits in the country are valued at more than 10 times the size of the nation's yearly economic production.

    Switzerland once was among the world's biggest tax havens: countries with little bank regulation or with low taxes. But the country ended its bank secrecy policy last year after facing intense legal pressure from Europe and the U.S.

    People seeking to avoid taxes in their home country can still hide their money in less developed countries where bank supervision is weaker. But Jacob Kirkegaard says the choices and advantages of doing so are shrinking.

    "Well, you can go to places like Dubai, some have mentioned Singapore, but Singapore has also recently joined these efforts, so it becomes increasingly difficult to keep your money at a place at which they are readily available."

    Some economists estimate that as much as eight percent of the world's financial wealth may be hidden in tax haven countries. That is more than $7 trillion. It is estimated that worldwide tax income would increase by $200 billion if that money were correctly reported to tax officials.

    And that's the Economics Report from VOA Learning English.

    I'm Mario Ritter.

    This story is based on a report by VOA's Mil Arcega. Mario Ritter wrote it for VOA Learning English. The editor was Caty Weaver.


    Words in this Story

    depositors – n. people placing money in a bank by making a deposit

    signal – v. to be a sign of something, to show something

    milestone – n. an important goal

    tax havens – n. territories or countries were tax laws permit people or corporations to avoid or limit taxation or bank secrecy laws in their own countries

    advantages – n. benefits or gains

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