Luxembourg begins to say goodbye to the past offshore
Material posted: Publication date: 12-04-2013

The largest tax haven in the Eurozone comes under pressure from the European Union to make concessions in the fiscal sphere, but remains one of the leading financial centers of the world.

What does any investor? His money is lying in some Bank, so he offered high interest rates, and to have his income taxed as low as possible taxes (and best of all - not subject to them at all). Where this is possible - on some exotic Islands?


Offshore in the heart of Europe

"Not at all. Why look far in the Caribbean? Simply look out the window", the operator is expressed Kilmer Reinhard (Reinhard Kilmer), German investigator of the tax police. He lists offshore or, as they say in Germany, "tax havens" located almost in the very center of Europe.

It is owned by the UK channel Islands in the English channel and the Isle of man. It is under the protection of France, the Principality of Monaco. Yes and Luxembourg, Switzerland and Austria still deliver a lot of trouble with the tax authorities of the EU, notes Reinhard Kilmer. And let the yield on deposits there is not as high as some of the British virgin Islands, but the safety of deposits in these three countries the highest.

So, small the Grand Duchy of Luxembourg, six decades ago were part of the six countries, marked the beginning of today's European Union, has a reputation as one of the main offshore zones in the continent and certainly is the chief in the Eurozone. However, Luxembourg's Finance Minister Luc Frieden (Frieden Luc) with this classification strongly disagree: "We are one of Europe's financial centres and no one pushing them to tax evasion".

According to official data, in the Duchy of 141 the Bank operates from 26 countries. "Luxembourg is among the top ten global financial centres and is the second most important in the world of investment funds," such enthusiastic assessment can be found on the website of the Luxembourg branch of Deutsche Bank.


Success secrets of the Grand Duchy of

The largest financial institution in Germany explains the extraordinary popularity of Luxembourg among international investors: "the Secret of success: clarity and flexibility. On the one hand, the unconditional mystery of the deposits and strict law against money laundering, the other - a competitive tax policy and pragmatic authorities issuing the necessary permits quickly and without bureaucracy".

And here is the result: experts believe that only in Luxembourg-registered investment funds corporate and individual clients from around the world have invested around 2.1 trillion euros. Management companies of these funds almost do not pay taxes. Minimum taxes are paid and many registered in the Grand Duchy subsidiaries of large international corporations. The violation of existing EU laws it is not.


A radical change of course

The financial sector Luxembourg has one of the highest in the EU indicators of income per capita. So there is nothing surprising in the fact that the authorities have all the powers to protect its business model.

However, under the impression of the collapse of Cyprus offshore acclaimed and publish a database of tax evaders, dubbed Offshore Leaks, the government of the Duchy seems to have begun to change their position.

In an interview published on 7 April in the German newspaper Frankfurter Allgemeine Sonntagszeitung, Luc Frieden expressed readiness "to strengthen our cooperation with foreign tax authorities" and, in particular, to join the automatic information exchange on tax contributions and income from Bank deposits. Still Luxembourg were strongly opposed.


The waiver of Bank secrecy?

Wednesday, April 10, followed by specific governmental Declaration: the accession to the mechanism of data exchange will take place by 1 January 2015. At the same time will be raised and the VAT rate amounting to 15 percent now. However, after that it will remain the lowest in the EU. Many observers interpreted this move as a de facto refusal by the Luxembourg authorities from the old Bank secrecy.

However, the financial sector of the Grand Duchy very quietly took this already clearly outlined the policy change. "We have to live with the damage. But Luxembourg as a financial centre, it will survive," said April 8 in an interview with German news Agency dpaисполнительный Director of the Association of Luxembourg banks ABBL Jean-Jacques Rommes (Jean-Jacques Rommes).

In this case we are talking about the taxation of income received primarily in the form of interest on invested capital. Large countries, such as Germany, insist on foreigners owning deposits in Luxembourg, paid appropriate taxes in the place of residence and not offshore. For this purpose, and the necessary exchange of information.


Corporate taxation in the EU: possible options

Another aspect of the problem - corporate taxation. Everything is more difficult, because fiscal policy is not within the competence of the European Union, the countries-EU members respond independently. Moreover, the differences in rates often consciously used by Brussels to stimulate economic development in small States.

So, in Malta, profits of enterprises generally not taxed in Cyprus the rate was still 10%, Ireland - 12.5%. In other countries it reaches 20-30 per cent. Actually there is no need to equalize tax rates in the EU, stressed in an interview with DW, the expert of the Brussels think tank BruegelГунтрам wolf (Guntram Wolff).

However, he continued, in the fiscal sphere has to be maximum transparency. As for a typical offshore, in the zone of the Euro currency they "in any case undesirable: we cannot allow any country to develop their banks and conducted its fiscal policy at the expense of other States".


Bernd Riegert, Andrew Gurkov


Tags: financial center , crisis , geopolitics , finances , Germany