Luxembourg thrives after tax regime shake-up
An inflow of bank deposits to Luxembourg from Asia and the Gulf have replaced reductions from European countries such as France and Germany following an overhaul of the Grand Duchy’s tax secrecy regime, reports the Financial Times.
Pierre Gramegna told the Financial Times in an interview that “bank secrecy had become more of a handicap than an advantage” for Luxembourgeois banks. After the decision to abandon bank secrecy, the level of bank deposits remained stable. “The clients we have been able to attract are from the Gulf and Asia,” he said.
Luxembourg introduced automatic exchange of tax information with other European countries in January, after years of resisting changes that could damage the country’s financial industry, which makes up a quarter of the country’s economy.
“For the time being we have witnessed stability in private banking which is very reassuring,” Mr Gramegna said.
The finance minister, who took office in 2013, said changes in the tax secrecy regime had been well trailed so that private banks were not caught off guard.
“There is a lot of know-how in Luxembourg,” Mr Gramegna said. “We are innovative and we could adapt”.
Mr Gramegna said the Organisation for Economic Co-operation and Development had agreed to carry out a new evaluation of Luxembourg’s transparency rules, in a sign of how fast the reforms were being introduced. The Grand Duchy is aiming to shake off the “non-compliant” verdict reached by a team of international assessors in November 2013, who said it had done too little to help countries track down tax cheats.
Luxembourg has also committed to implementing a new global standard for automatic exchange of information, known as the common reporting standard, by 2017.
“We are on a train of reforms which is really a bullet train. Things that used to take decades, take months.”
Mr Gramegna took issue with criticisms of Luxembourg following the European Commission’s decision to investigate tax rulings agreed with Fiat, the car manufacturer, and Amazon, the ecommerce group, and after leaks of hundreds of other rulings that showed how multinationals used the Grand Duchy to lower their tax bills.
He said 26 out of 28 EU countries offered rulings. “There is a misunderstanding that Luxembourg doesn’t want to play by the rules,” he said.
The OECD warned last month that Luxembourg risked losing revenue from multinationals “as a consequence of the ongoing evolution of international tax regulations that necessarily trigger changes of tax rulings”.
Mr Gramegna said he was “calm” about the outcome of the OECD’s corporate tax reforms, known as the base erosion and profit shifting project as long as they create a “level playing field”.
“Luxembourg is part of the solution, not part of the problem,” he said.
