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| (Photo: -JvL-) |
Billions
and billions of euros belonging to Dutch savers are hidden away in Luxembourg
bank vaults; the money is safe from detection by the Dutch tax office thanks to
the banking secrecy laws in the Grand Duchy. Safe for now but for how much
longer? Brussels is demanding banking transparency, but Luxembourg is
resisting.
“I don’t
know how they manage it, but it’s dirt cheap here," says a Dutch motorist
filling up at a Luxembourg petrol station.
“It's 17
cents per litre cheaper here. Luxembourg
is in the EU as well but apparently the country doesn't need the tax revenue as
much as we do in the Netherlands. I guess they don't fritter their tax money
away,"
He's got a
carton of cheap cigarettes on the backseat and he's ready to continue his
journey to southern France. Before he pulls out, he laughs and says, “I've got
nothing to complain about, I'm doing all right but buying stuff cheap in
Luxembourg is part of the fun of driving to France."
Secrecy
laws
When ordinary
people think about Luxembourg, two things spring to mind; low income tax and
low VAT. When rich people think about Luxembourg, the country's banking secrecy
laws spring to mind.
According
to Fernand Grulms of Luxembourg for Finance, Dutch savers have an estimated 50
billion euros stashed in the Grand Duchy’s banks, “it could be a bit more, or
it could be a bit less," he shrugs. The Luxembourg banking sector manages
320 billion euros for European savers and, thanks to the country’s secrecy laws,
they are all anonymous and evade taxation in their countries of residence.
Tradition
Brussels
passed a series of measures in 2005 to stop cross-border tax dodging,.
Luxembourg and Austria, which also maintains banking secrecy laws, demanded
exceptions. Since then, Luxembourg has voluntarily contributed revenues on
behalf of their - still anonymous - clients to other EU member states. Fernand
Grulms: “Financial privacy; it does still exist and our banking secrecy laws
still on the books.”
"It's
an old tradition that we don't want to just give up," says Pierre Leyers,
chief economics editor of the Luxembourger Wort newspaper.
“It's not
about tax evasion but about privacy. Rich people prefer it when the tax office
doesn't know exactly how much money they have."
Double
standards
However,
the European commission has had enough of ‘traditions’ in the Grand Duchy and
criticism, particularly of Luxembourg Prime Minister Jean-Claude Juncker, is
mounting. It is ironic that in his role as chair of the Eurozone countries, Mr
Juncker has repeatedly urged eurozone leaders to harmonise their financial policies
and called for more transparency.
French
President Nicolas Sarkozy’s criticism was particularly biting:
“The time
for double standards is over. You can't very well tell everyone else to be
transparent and still maintain banking secrecy in your own country. It's just
not possible, Monsieur Juncker.”
At home in
Luxembourg, Jean-Claude Juncker still enjoys enormous popularity, even after 16
years as Prime Minister. The motto in the country is ‘we want to stay just who
we are’ and most Luxembourgers feel safest with Mr Juncker at the helm.
Stefan van
Look, chair of the Dutch Association in Luxembourg:
“I
regularly see the prime minister going out for a sandwich at lunch time, no
bodyguards whatsoever, and he always stops to say hello."
Small and
smart
There are
around 4,000 Dutch nationals living in Luxembourg and the vast majority of them
work in the financial sector.
"We do
pay less taxes here than in the Netherlands but make no mistake, Luxembourg is
not a tax paradise. I look at it like this: if you're small, you have to be
smart."
The EU is
considering ways of expanding the 2005 guidelines, all of which will further
impinge on banking secrecy laws. Stefan van Look comments: “Of course other EU
countries want to try and get rid of Luxembourg’s banking laws; it’s better for
their own banking sectors.”
Fernand
Grulms is vehemently opposed to what he calls ‘discriminatory regulations’:
“If the
European Commission wants to force us to give up our banking secrecy then it
will have to conclude agreements with countries outside the European Union,
such as the one agreed with Switzerland. If there are countries outside the
European Union that maintain banking secrecy, Dutch savers will simply move
their money across a different set of borders. Is that advantageous for anyone
within the European Union? I don’t think so.”
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