Declaration by Prime Minister Jean-Claude Juncker before the Chamber of Deputies regarding banking secrecy

Today, the German Minister of Finance and the French Minister for the Budget called in a meeting in Paris, in the form of an invitation addressed to all OECD member states to discuss the issue of so-called tax havens. (…) This invitation is incidentally three months old and therefore has nothing to do with the current financial crisis. It is a known fact that (…) the subject of banking secrecy is a recurring theme in Europe.

In the European Union, we have come to an agreement on the taxation of savings income, and that under difficult circumstances. (…)

The European Union Savings Tax Directive has not (…) done one iota of damage to Luxembourg’s financial centre, in fact it has procured additional revenue for the state budget. (…)

For the last two months, the Luxembourg government has made it clear that it would not attend this meeting, unless the proposed conclusions expected to arise from this meeting would be such that we could live with them.

The proposed conclusions expected to arise from this meeting, however, establish an equation between banking secrecy and a tax haven. Since we do not accept this basic hypothesis, we did not see why we should partake in this session (…), given it would merely have led to a declaration by the Luxembourg government tonight stating that it had been an interesting meeting but that we did not agree with the conclusions. Since those who extended the invitation have known for months that we do not agree with the conclusions that are being proposed, I felt it more appropriate to not attend the meeting. (…)

(…) What is our position with regard to the French Minister for the Budget, Mr Woerth, expressing the reproach that we cannot, in the long run, (…) oppose the abolition (…) of banking secrecy and that instead the withholding tax system and the exchange of information would reflect the abolition of the banking secrecy.

(…) We have come to an agreement within the European Union that three countries, namely Austria, Belgium and Luxembourg, are not to exchange information and that the other countries are to have no banking secrecy. We did not wish to relinquish our banking secrecy, not then and not now, and that is why we have a withholding tax. As a result of this withholding tax system, those states that are our neighbours as well as those located a bit further away acquire some of the revenue created in Luxembourg’s financial centre. (…)

(…)

(…) We currently levy a 10% withholding tax for those who live in Luxembourg, and a 15% withholding tax for those who reside abroad. This will, however, gradually increase to 35%. It was the general opinion in Europe, when we implemented the Savings Tax Directive, that a 35% withholding tax rate would have the same effect, in terms of discouraging tax evasion, as a lifting of banking secrecy. We are only just approaching this stage. We are gradually getting there, only because we gradually agreed, as Luxembourg, to go down this route. The day that withholding tax rates reach 35% is the day that withholding tax is at least equally dissuasive to tax evaders as banking secrecy is attractive to tax evaders. Therefore I cannot a priori see why this system of rules should be changed.

There is a discussion within the European Union whether financial products other than those that today fall within the field of application of the Savings Tax Directive should also fall under the scope of the same directive. This is a discussion we are involved in. But to say that we cannot, in the long run, avoid information exchange, in other words the lifting of banking secrecy, because this does not comply with the wishes, expectations and positive law of the European Union, that is a false assertion. We are undergoing a process of change, which for all intents and purposes was a negotiating process, that was moulded into a positive legal norm, which we adhere to and which we would like to see our neighbouring states adhere to as well.

(…)

Given that we see each other so often, day and night, I have talked about it to the French Prime Minister and the French President to see if they have any particular thoughts on Luxembourg, and the French President and French Prime Minister responded by saying that when they speak of tax havens, they do not think of Luxembourg. (…)

As for the rest, I am of the opinion that the existence of banking secrecy is not at the origin of the financial crisis we are currently experiencing. The fact that we have banking secrecy in individual countries in Europe is not to be blamed for the fact that we are witnessing this financial crisis. The fact that banking secrecy has, at the high end, led to a rapidly widespread non-transparency of global financial products is nevertheless a fact I cannot deny. I cannot see any particular Luxembourgish characteristics in this context. There are other territories, also within the European Union, such as the British Channel Islands, that have put products out into this world, which have contributed to this non-transparency – which is not really the case of the Luxembourg financial centre . This fact cannot be contested. (…) We must thus be prepared in the European Union, not in the OECD, but in the European Union, to talk about ways to avoid a massive exploitation of the persistence of banking secrecy in individual European financial centres.

(…) The notion, however, that the world’s entire financial system must be changed but that things must remain unchanged in Luxembourg, is one that I cannot spontaneously adhere to.

Nevertheless, the insistence of the government to defend banking secrecy against arguments that are worth no more than the arguments speaking in favour of banking secrecy, is an essential one. This is a discussion we must conduct with our partners and friends in the European Union and this is a discussion we are indeed having. Luxembourg will not be abolishing its banking secrecy overnight, but Luxembourg is participating in all discussions that contribute to an increased level of transparency in the financial markets and Luxembourg will in that context be demanding that all special taxes and regulations that are present elsewhere on European Union territory, are subjected to a critical assessment that is at least as intensive as that which our banking secrecy is subject to. And Luxembourg will also point out how we have done this over the last seven to eight years (…) that special products held by other countries will be assessed just as vigorously. (…)