Austria struggles for unity before EU tax talks

VIENNA, April 26 Fri Apr 26, 2013 1:32pm BST

VIENNA, April 26 (Reuters) - Domestic politics are bedevilling Austria's efforts to forge a unified stance on easing banking secrecy just days before initial talks with European Union partners on how to crack down on cross-border tax cheats.

Austria is the only one of the EU's 27 states yet to agree to routinely share data on bank accounts held by foreigners, after Luxembourg bowed to pressure this month to end decades of banking secrecy that helped make it a major financial centre.

Chancellor Werner Faymann says his centre-left Social Democrats and their centre-right People's Party partners agree on principles for expert-level EU negotiations next week.

But conservative Finance Minister Maria Fekter - who has vowed to fight "like a lion" to preserve bank secrecy until other countries tackle offshore financial centres - keeps taking a tough line, complicating efforts to present a common front.

Tensions burst into the open when a finance ministry draft proposal - crafted as a joint letter to Brussels from Faymann and Fekter, but which further detailed Fekter's hardline position - was leaked to the Austria Press Agency.

A furious Faymann immediately said he would not sign such a letter and accused Fekter of "bad style" for negotiating in public. He said the flap had made Austria a "laughing stock".

Othmar Karas, an Austrian conservative who is vice president of the European Parliament, expressed dismay.

"This is a regrettable domestic farce that is seen within the EU as unprofessional," he told APA.

The European Commission had no comment.

The letter set out Austrian conditions for letting the European Commission negotiate tax accords with countries like Switzerland and the United States, which Vienna has blocked.

It said Austria wanted information exchanges to be based on the Organisation for Economic Cooperation and Development's model and to include owners of anonymous trusts, and for the European Court of Justice alone to decide on legal disputes.

Vienna also wants to keep existing bilateral tax deals with Switzerland and Liechtenstein which preserve bank secrecy but are expected to bring in more than 1 billion euros from mid-2013 from accounts Austrians have quietly stashed across the border.

BAD IDEA

"The finance minister seems to have had an idea - not an especially good one - that has become public," Faymann told broadcaster ORF as political infighting flared before national elections due by late September.

A spokesman for Faymann reiterated the coalition parties had agreed the main pillars for talks: that Austria was prepared to discuss sharing more information if needed to catch foreign tax dodgers but banking secrecy must remain for Austrians.

But the furore will not have strengthened Vienna's hand.

Thomas Wieser, an Austrian bureaucrat who heads the staff group that coordinates meetings of euro zone finance ministers, said proposals in the letter may have gone too far.

He told the Kurier paper that creating a trust register as Fekter wants was not part of the EU negotiating mandate. Countries like the United States would balk at having an EU court ruling on disputes, he said, while Austria cannot hope to have bilateral accords run alongside similar EU treaties.

OECD guidelines call for sharing savings information with other countries only on demand and for specific cases, but this may change given growing political momentum for tougher action.

"The political support for automatic exchange of information on investment income has never been greater," OECD Secretary-General Angel Gurria said this month, citing Luxembourg's switch and a U.S. campaign to track down its citizens' foreign wealth. (Additional reporting by Angelika Gruber in Vienna and Ilona Wissenbach in Brussels; Editing by Catherine Evans)