Time running out for tax evaders as deal brokered with non-EU states

The opportunity for people to evade paying billions of euro in tax will be considerably reduced after a breakthrough by Finance Minister Michael Noonan that will see agreements brokered with five non-EU tax havens.

While Austria and Luxembourg still refuse to share information on who has savings in their banks, their prime ministers are set to reverse this when EU leaders meet next week.

The revision of the 2005 savings tax directive has been held up for two years because of the objections of the two countries. But with a global move against tax evasion, the EU has been ramping up the pressure in recent months.

Mr Noonan said there is growing support for the automatic exchange of information between states as the new global standard, and said the EU had to co-ordinate their work with what was happening globally.

Five countries have begun a pilot project where they automatically exchange such information. This could be a template for other countries, he said.

The European Commission will now negotiate stronger savings tax agreements with Switzerland, San Marino, Andorra, Liechtenstein, and Monaco. Until now they have had the option of transferring a sum in lieu of tax to the country where the bank account holder lives on an anonymous basis.

Austria and Luxembourg have adopted the same approach and insist they would not change unless the five other non-EU countries did also.

Taxation commissioner Algirdas Semeta said it was unfortunate that Luxembourg and Austria continued to remain outside. “We must not make our progress within the EU dependent on our progress with third countries,” he said.

“In the battle against tax evasion, what we achieved today was undoubtedly a step forward. Let’s hope that what our leaders agree at the summit next week is more like a giant leap,” Mr Semeta said.

The EU can push for higher international standards on transparency and information exchange, and seize the push in the G20 and G8 summits to ensure fair play on tax matters worldwide, he said.

“But we can do this with much greater conviction if our own house is fully in order.”

Mr Semeta intends to make a proposal shortly to extend automatic exchange of information to cover dividends, capital gains, and royalties which, along with the revised savings directive, will extend the scope of information automatically shared between member states.

He appealed for a political commitment to tackle Vat fraud. Mr Noonan hopes to get agreement on such measures before the end of the Irish presidency in June.

The OECD has been asked to produce a report on how a global bank information exchange could operate. British prime minister David Cameron, as chair of the G8, hopes to present this to its meeting in June.

Finance ministers of Germany, France, Britain, Italy, and Spain last month announced they would automatically exchange information to help fight tax evasion. It is based on the Foreign Account Tax Compliance Act in the US which is similar to the EU savings directive.

Mr Noonan said Ireland was the fourth country to sign up to the act with the US.