Defense of Bank Secrecy by Austria and Luxembourg Is Good News for Tax Competition

It is no exaggeration to say that destroying tax havens is probably the number one goal of the world’s statist politicians and international bureaucrats. The European Commission has a new assault against low-tax jurisdictions. The Paris-based OECD is preparing to renew its ant-tax competition project. And American politicians such as Barack Obama want to persecute tax havens as part of his assault on private capital. Switzerland is the top target of the statists, but other jurisdictions such as Singapore, Austria, and Luxembourg also are being persecuted. Switzerland is doing a good job defending its human rights policy of strong privacy, but it’s good news to read in the European Voice that Austria and Luxembourg just announced that bank secrecy is not a negotiable matter:

Austria and Luxembourg have declared that they will resist attempts to crack down on banking secrecy, despite calls from other EU states and the European Commission for stricter rules to tackle tax evasion. Germany is pushing for tougher action against tax havens, partly motivated by discontent that German citizens are putting their savings in bank accounts in Switzerland and Lichtenstein. … A statement issued by…Josef Pröll, Austria’s finance minister, and Luc Frieden, Luxembourg’s budget minister, said… “banking secrecy is not up for negotiation”. …The European Commission on 2 February proposed that member states should abolish banking secrecy in relations between national tax authorities.

Tax competion, fiscal sovereignty, and financial privacy limit the power of governments to act like monopolists. Tax havens play an especially important role since politicians know that these jurisdictions give taxpayers some ability to protect themselves from predation. To learn more about the economic benefits of tax havens, click here. To learn more about the moral case for tax havens, click here. And to see why anti-tax haven demagoguery is misguided, click here.