March 23, 2023

A Push Against Tax Havens Gains Support in Europe

DUBLIN — Europe’s efforts to crack down on tax havens gained momentum on Saturday as finance ministers from nine countries agreed to share more bank information. Ministers from Belgium, the Netherlands and Romania joined their French counterpart in a push for more automatic exchanges of bank records that already had the backing of Britain, Italy, Poland and Spain. For France, the issue has taken on greater urgency since Jérôme Cahuzac, the former budget minister, quit after he acknowledged having foreign holdings in Switzerland that he previously denied.

“The surge in member states’ appetite for progress and action in the fight against evasion is extremely welcome,” Algirdas Semeta, the European Union commissioner for taxation, said at a news conference on Saturday after two days of meetings where ministers discussed adoption of Europe-wide laws modeled on the Foreign Account Tax Compliance Act, a United States initiative to find hidden accounts overseas.

“The tools are already on the table, waiting to be seized,” said Mr. Semeta, referring to plans in Europe to provide greater exchanges of information on interest earned on savings, including from trusts and foundations.

Mr. Semeta said that the European crackdown against tax evasion could eventually extend to dividends, capital gains and royalties, significantly expanding the revenue earned by national treasuries. He also encouraged countries to bring forward a date, currently foreseen for 2017, when those revenues are meant to fall under the microscope. Europe is also being pushed toward greater transparency by the recent release of an investigative report on thousands of offshore bank accounts and shell companies, and by the prospect of a meeting of finance ministers from the Group of 20 leading economies next Thursday in Washington, where tax transparency is expected to be discussed.

In the French case, the Socialist government of François Hollande was deeply embarrassed by the revelations at a time of economic hardship for many citizens, and the French finance minister, Pierre Moscovici, led the calls for reforms at a hastily assembled news conference on Friday evening.

Taking leadership over the issue of tax havens “is very important for ensuring that citizens can trust the efficiency and fairness of our tax systems,” said Mr. Moscovici, who was flanked by Wolfgang Schäuble, the German finance minister, and George Osborne, Britain’s chancellor of the Exchequer, and by ministers from Poland, Spain and Italy.

The initiative should eventually cover “all kinds of revenues,” and would be similar to the American tax compliance act, Mr. Moscovici said.

One European tax haven, Luxembourg, bowed to such pressure on Wednesday and said it would begin forwarding the details of its foreign clients to their home governments.

Standing in the way is Austria, which has resisted agreeing to an automatic exchange of banking information between European Union countries.

Chancellor Werner Faymann of Austria recently suggested that talks were possible, and European officials said they expected Austria eventually would offer concessions. But the country’s finance minister, Maria Fekter, has showed no signs of backing down.

“We will fight for bank secrecy,” Ms. Fekter said on Saturday. “We are no tax haven,” she said. A day earlier she sought to portray Britain as one of the European Union’s biggest tax havens.

Mr. Osborne said at the news conference on Friday evening that he was pushing for more transparency from the Cayman Islands and British Virgin Islands.

“The places that you can hide are getting smaller and smaller and fewer and fewer,” Mr. Osborne said. “We are in advanced stages of discussions with them,” he said of talks with the two territories. “But I think they are in no doubt about what we expect of them,” he said.

More European countries are expected to join the campaign in coming weeks after Herman Van Rompuy, the president of the European Council, said on Friday that the bloc’s 27 leaders would discuss the issue at a summit meeting of leaders next month in Brussels.

David Jolly contributed reporting from Paris.

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I.M.F. to Contribute 1 Billion Euros to Cyprus Bailout

“This is a challenging program that will require great efforts from the Cypriot population,” Christine Lagarde, the managing director of the I.M.F., said in a statement.

The goal was to “stand by Cyprus and the Cypriot people in helping to restore financial stability, fiscal sustainability and growth to the country and its people,” Ms. Lagarde said in a second statement she issued jointly with Olli Rehn, the European Union commissioner for economic and monetary affairs.

The statements follow agreement on Tuesday between Cyprus and the so-called troika of international organizations — the European Central Bank, the European Commission and the I.M.F. — that painstakingly negotiated the €10 billion, or $13 billion, bailout and the terms of the deal.

“This is an important development which brings a long period of uncertainty to an end,” Christos Stylianides, a spokesman for the Cypriot government, said Tuesday in a statement made available on Wednesday.

“Undoubtedly, the completion of the agreement with troika should have taken place a lot sooner, under more favorable political and financial circumstances,” said Mr. Stylianides, who was apparently referring to infighting in Cyprus about responsibility for the financial debacle.

The memorandum of understanding between Cyprus and the troika outlines budget cuts, privatizations and other conditions Cyprus must meet to receive its allotments of bailout money. A parliamentary vote in Cyprus is needed to approve the deal, while Germany and Finland are also expected to seek the approval of their Parliaments.

Olivier Bailly, a spokesman for the European Commission, said Wednesday that the memorandum would not be made public while euro-area governments reviewed the document. But Cypriot authorities on Tuesday described elements of the agreement that they regarded as favorable.

Mr. Stylianides, the Cypriot spokesman, said the deal safeguarded important parts of the economy by keeping deposits of natural gas in offshore waters under Cypriot jurisdiction, and by winning two more years until 2018 to hit deficit targets and carry out privatizations.

Mr. Stylianides also said the government saved the jobs of contract teachers and of 500 civil servants, and had overcome demands by the troika to tax dividends.

Even so, the memorandum could be hotly contested in by the Cypriot Parliament, where many lawmakers have criticized crisis measures that already have been taken, like capital controls, which threaten to make a bleak economic outlook even worse.

In a move partly aimed at easing those tensions and smoothing parliamentary approval of the memorandum in Cyprus, the government in Nicosia on Tuesday appointed a new finance minister, Harris Georgiades, to replace Michalis Sarris, who resigned. Mr. Sarris has been blamed at home and abroad for his handling of the crisis. Mr. Georgiades was the deputy finance minister.

Over the course of the negotiations to reach a deal for Cyprus, the spotlight fell on whether the I.M.F. was too forceful in pressing countries like Cyprus to limit debt and force losses on investors. The approach of the I.M.F. strained relations with the European Commission, which had harbored concerns about the potentially confidence-sapping effects of such aggressive measures on other economies within the euro area.

The I.M.F. proportion of the package Cyprus is smaller than in some previous arrangements for countries like Greece, but that was not a sign of a change in the I.M.F.’s policy in the euro area, said Mr. Bailly, the commission spokesman. The sums given by the I.M.F. depend on “specific situation” in each country, he said, adding that the €1 billion, three-year loan for Cyprus “was unanimously agreed in the troika.”

Ms. Lagarde said substantial spending cuts would be needed “to put debt on a firmly downward path” including in areas like social welfare programs.

But she said the plan, which the I.M.F. could agree to early next month, sought fairness.

“The fiscal and financial policies of the program seek to distribute the burden of the adjustment fairly among the various segments of the population and to protect the most vulnerable groups,” she said.

More than 95 percent of account holders at Laiki Bank, which will be closed under the plan, and at the Bank of Cyprus, which is being restructured, were fully protected, she said. Bank of Cyprus and Laiki Bank are the two biggest banks in the island nation.

Key fiscal measures included raising the country’s corporate income tax rate to 12.5 percent from 10 percent, she said.

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Greek Coalition Partners to Back New Reforms

Prime Minister Lucas Papademos had sought agreement among coalition partners on the broad outlines of a deal with private creditors to erase $130 billion of debt as well as a recovery plan suggested by the European Commission, European Central Bank and International Monetary Fund, collectively known as the troika.

Athens had reported progress over the weekend between Greece’s political leadership and Charles Dallara of the Institute of International Finance, the bankers’ lobby representing most investors, regarding how much of a loss the private sector creditors would be willing to accept on their bond holdings. A deal is expected within days.

The statements on Sunday by Greece’s technocrat premier suggested that he had overcome some of the objections of the party leaders — his Socialist predecessor George Papandreou, the conservative leader Antonis Samaras and the right-wing leader Georgios Karatzaferis — to new austerity measures proposed by the troika, although some points of contention remain.

The three party leaders were later quoted on Sunday as saying that their only objections were to proposed cuts to wages in the private sector — which would intensify a deep recession — and to reported German demands for a European Union commissioner to oversee Greek budget decisions.

Still, any new measures could face a struggle to pass the Parliament, where many lawmakers remain resistant to unpopular measures.

Mr. Papademos said that the alternative to the completion of talks on the debt swap and on a second bailout for Greece was a potentially catastrophic default.

“If this process is not completed successfully, we will find ourselves faced with the specter of bankruptcy, which will have serious repercussions for society and especially for the economically vulnerable,” he said.

The talks with private creditors have broken down twice before, largely because the International Monetary Fund and European leaders have pushed for greater debt reduction in light of Greece’s worsening economic outlook, so there is again the possibility that these negotiations will founder.

Reining in Greece’s budget problems will not be the only item Monday in Brussels.

Leaders are expected to bow to mounting evidence that austerity alone risks stoking recession and plunging fragile economies into a downward spiral; a draft of the European Union summit meeting communiqué calls for “growth-friendly consolidation and job-friendly growth.”

Leaders will discuss long-term structural reforms and better use of European Union subsidies, while avoiding mention of fiscal stimulus from Germany, the powerhouse of the euro zone.

Then the meeting, which will be held at the same time as a national strike in Belgium, will try to satisfy Berlin’s desire for fiscal discipline by wrapping up talks on a new intergovernmental treaty.

Meanwhile, several nations are also expected to champion the need for a financial transaction tax, a plan that one official study suggested could cut growth.

Stephen Castle contributed reporting from Brussels.

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