* Chancellor Faymann says set for joint EU talks with
* Conservative coalition partners in Vienna have
* Issue of different treatment for foreign and domestic
* Luxembourg considering end to bank secrecy - minister
By Michael Shields and Marc Jones
VIENNA/LONDON, April 9 Austria will join
Luxembourg for talks with the European Union on how to crack
down on cross-border tax cheats, Chancellor Werner Faymann said
on Tuesday, signalling an easing of Vienna's hardline stance on
coveted bank secrecy.
Faymann, a Social Democrat, stressed that Austrians'
domestic bank accounts would remain shielded from the taxman's
prying eye, but foreigners' wealth in local banks could face
unprecedented scrutiny if the talks with Brussels go well.
As momentum for tax talks grew, Luxembourg Finance Minister
Luc Frieden said his country may end its bank secrecy rules by
automatically handing over details of account holders to other
The moves mark a U-turn for the two countries that for years
refused to share personal data on savers with fellow EU members.
They instead get banks to withhold tax on EU citizens' interest
income and give the money anonymously to home countries.
But with austerity-minded EU peers keen to collect more tax
revenue from citizens' offshore wealth, the model has come under
heavy pressure. This has grown since last month's bailout of
Cyprus, whose oversized banking system had gorged on foreign
funds attracted by low taxes and easy regulation.
The European Commission warned Austria on Monday that its
banking secrecy would put it in a "lonely and unsustainable
position" if it did not adopt the same rules as other countries
in sharing data on foreign depositors.
Faymann took the plunge on Tuesday, portraying the move as a
way to protect Austria's reputation and help to catch foreign
fraudsters while preserving his compatriots' privacy.
"We are trying to find an appropriate form of combating tax
fraud more strongly than before. We will conduct talks together
with Luxembourg," he told reporters after a cabinet meeting.
Asked if that meant Austria was giving up its decades-long
resistance to sharing the identities of savers, he said: "We are
conducting these talks together with Luxembourg so that
something comes out of it. That is what it means."
FOREIGNERS VS LOCALS
Before the meeting, conservative Finance Minister Maria
Fekter stressed that Austrian law did not let the country share
personal information about bank depositors with other states.
"In our constitution, privacy and data protection get very
high priority. That really does not fit with an automatic
exchange" of data, she said, questioning whether EU law allowed
special treatment of other EU nationals with Austrian accounts.
In London, Frieden said Luxembourg was considering an
automatic swap of information on depositors. "It has not been
decided, it is something that is being discussed in the
government," he told Reuters.
Luxembourg's banking system holds deposits equivalent to
about 10 times the tiny country's economy.
Austria's banks, the leading lenders in emerging Europe, at
times use banking secrecy as a marketing tool, noting that only
a constitutional amendment could end the centuries-old practice.
But foreign deposits play a relatively modest role. Central
bank data show other EU citizens have around 35 billion euros
($45.6 billion) in banks here, a tenth of overall deposits.
"Our business model does not depend on banking secrecy,"
Erste Group Chief Executive Andreas Treichl said in an
online chat session his bank held on Monday.
Still, banking secrecy strikes an emotional chord with many
Austrians, and politicians routinely promise they will defend
"grandma's passbook" from state snooping.
"The government already knows my husband's income when he
earns it. How much we choose to have in our savings is private
and should be anonymous," Vienna resident Theresa Schauer said.
Management consultant Siegfried Neubauer, 48, said the
debate was meaningless before elections due by late September.
"I don't really know why we're talking about it at all. It's
just stirring up emotions before the elections. When the
politicians say: 'Hands off our passbooks!', everyone jumps up
and says: 'correct!' I'm sceptical."
One government official, who asked not to be named, said
banking secrecy was more of an emotional than a rational issue.
"The public has the impression that if you lift banking secrecy
my neighbour can know what I have in my passbook," he said.
But he added that in any event the tradition is deeply
rooted in predominantly Roman Catholic Austria. "Catholic
countries like secrecy. Openness is a very Protestant kind of
concept," he said.