It was the first time that Austria, long considered a tax haven for the wealthy, agreed to a deadline for disclosing such information after rebuffing calls for greater transparency for a decade. The country said it expected to reach an agreement in principle on the matter by the end of the year.
That news, at a summit meeting of European leaders here, upstaged a separate but related topic that has dominated headlines this week: tax-reduction strategies by big multinational companies like Apple, which Congressional investigators in Washington say slashed its tax bill by setting up companies in Ireland.
Pressure on Austria has grown more intense as European countries try to curb citizens’ ability to stash money in other jurisdictions, shortchanging their home governments of tax revenue during a time of lean budgets and gaping deficits.
Ferreting out hidden bank accounts has become a cause célèbre in many countries, especially Greece, which has jailed hundreds of people suspected of tax delinquency, including former government officials. In France, Jérôme Cahuzac, a French minister responsible for fighting tax evasion, resigned upon admitting, after weeks of denials, that he had held a secret bank account in Switzerland.
The 27-member union estimates that tax avoidance costs governments there a total of $1.3 trillion a year.
The crackdown on bank secrecy in Europe is also a result of American demands for fuller cross-border sharing of information under the Foreign Account Tax Compliance Act.
“We will act jointly, and I believe we will manage the exchange of data by the end of the year,” the Austrian chancellor, Werner Faymann, said at the meeting here.
Mr. Faymann said it was a “bad day for tax cheats.” But he stressed that Austria’s concessions were contingent on the “negotiations with third countries” like Switzerland. Austrian officials say that without overhauls in those other jurisdictions, financial services industries in the European Union would be at a competitive disadvantage.
The European leaders, who met for four hours on Wednesday, also directed the European Commission to negotiate tougher agreements with five countries: Switzerland, Andorra, San Marino, Monaco and Liechtenstein.
The chances of the other countries agreeing quickly are not great. And bloc officials warned that those countries could turn the tables by asking the union to make changes first, risking a standoff.
But those countries are also being pressed by the United States for details of all accounts held by American taxpayers. Under that pressure, they may decide there is not much point in digging in their heels with the European Union.
Those negotiations might also clear the way for action by Luxembourg, a bloc member that agreed last month to share banking data by January 2015. But it is still awaiting the outcome of talks with the Swiss before deciding whether to expand the information exchange agreement to include investments like trusts and foundations, as Austria has apparently done.
Once discussions with Switzerland are completed, Jean-Claude Juncker, the prime minister of Luxembourg, said his country “would be in a position to decide the extent of the expansion” of the information exchange.
The summit meeting was billed as an opportunity to push ahead with a crackdown on tax avoidance, but it risked being overshadowed by mounting indignation over reports that American companies, including Apple, had sheltered profits in European countries like Ireland.
Findings by Senate investigators in Washington indicated this week that Apple sharply reduced its tax bill in the United States and the rest of the world by recording most of its worldwide income in Ireland and paying low corporate tax rates there.
The findings and subsequent outcry put the Irish prime minister, Enda Kenny, on the defensive even before he arrived here on Wednesday.
“I’d like to repeat that Ireland’s corporate tax rate is statute-based, is very clear and very transparent — and we do not do special deals with any individual companies in regard to that tax rate,” Mr. Kenny said Wednesday afternoon. “Our country has had its stable corporate tax rate for many years, but that’s not the only reason that companies come to Ireland.”
Similar controversies have risen in Britain about the low taxes paid by the British operations of American companies like Google and Starbucks.
The German and French leaders pledged on Wednesday to step up efforts to recover more funds from global companies.
“We will work toward ensuring companies have to pay more where they are based,” Angela Merkel, the German chancellor, said at a news conference after the meeting.
François Hollande, the French president, told a news conference that Europe should unite to combat profit-shifting by large corporations.
“We cannot accept that a certain number of companies can put themselves in situations where they escape paying taxes in ways that are legal today,” Mr. Hollande said. “We must coordinate at a European level, harmonize our rules and come up with strategies to stop this.”
Speaking on Wednesday at the Brussels summit, Prime Minister David Cameron of Britain insisted he was taking a tough line on taxes with major multinationals like Google, after that company was accused on Wednesday by Ed Miliband, the leader of the opposition Labour Party, of going to “extraordinary lengths” to avoid paying tax in Britain.
Mr. Cameron said he had raised the issue with Google’s executive chairman, Eric E. Schmidt. But Mr. Cameron also cautioned against making targets of particular firms. “I don’t think we’re going to solve this if we simply take one company or another company that is registered in Europe, this one in Ireland,” Mr. Cameron said.
Article source: http://www.nytimes.com/2013/05/23/business/global/european-union-leaders-meet-on-tax-avoidance.html?partner=rss&emc=rss