Ministers from OECD countries agreed on Tuesday on the possibility of imposing sanctions on countries that do not stick to the OECD's tax standards, but left open when such measures should be implemented. The ministers were meeting to pressure nations like Switzerland to step up efforts to combat bank secrecy and to assess progress made by countries on an OECD "grey list" of states needing to improve their tax co-operation standards.
A number of European countries maintain strict laws protecting banking privacy, although many of these have been modified in recent months as their governments seek to comply with the standards of the Organisation for Economic Co-operation and Development (OECD).
German Finance Minister Peer Steinbrueck said he was pleased that a communique could be agreed by the 18 countries, including Switzerland, Austria and Luxembourg - all of which are on the OECD "grey list". "You have here before you extremely happy French and German ministers," he told a joint news conference with French Budget Minister Eric Woerth, with whom he jointly hosted the meeting. "We have taken more steps forward," added Woerth.
In the communique, the 18 countries said they would promote best practices to protect their tax base against countries and territories that are not implementing the OECD's tax standards. "Defensive measures should be applied to prevent undue delays in the implementation," they added in the communique.
THEY SAID THESE MEASURES COULD INCLUDE:
-- increased withholding taxes in respect of a wide variety of payments made to non-co-operative jurisdictions;
-- denial of deductions in respect of expense payments to payees resident in a non-co-operative jurisdiction;
-- termination of treaties with countries and territories which refuse effective exchange of information.
Swiss Finance Minister Hans-Rudolf Merz said he advocated sanctions against states that are uncooperative on tax issues but warned against threatening sanctions "too soon". Austrian Finance Minister, Josef Proell, said he thought the exact nature of sanctions should be decided later.
"I see it's necessary to have sanctions. What kind of sanctions? I think that should be a debate for the future, also in the framework of the OECD," he told Reuters. He was not worried that Austria would be hit with sanctions. "We will fully accept the OECD standards so we are not affected by the sanctions at the end of the day," Proell added.
Proell said he was pleased Tuesday's agreement did not include a provision for automatic exchange of tax information between countries. Instead, countries have to give the bank account details of the person about whom they want tax information. "Fishing for data should not be possible," he said.
In the communique, the OECD ministers did not spell out how individual countries on the grey list had advanced in their efforts to address bank secrecy but they said significant progress had been made since they met last October. Ahead of the meeting, Switzerland said it had agreed to revise its double taxation agreement with Germany, easing diplomatic tensions between the countries over Swiss bank secrecy.
Merz could not say when the new agreement would take effect. In another development affecting Switzerland, the New York Times reported on Tuesday that the US Justice Department may drop a legal case aimed at forcing Swiss bank UBS AG to reveal the names of 52,000 wealthy American clients suspected of offshore tax evasion.
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