Luxembourg, Austria drop opposition to tax transparency rules Countries withdraw veto against automatic exchange of account information.

Updated 21.03.2014 / 16:45 CET

A five-year-long deadlock over European Union member states sharing more information on tax ended last night (20 March), as the leaders of Luxembourg and Austria, the two member states opposing the proposal, withdrew their opposition.

The progress represents an important step in efforts to build EU-wide consensus on tax transparency and the fight against tax evasion and avoidance. The agreement sends a "strong unanimous commitment to the global fight against tax evasion", said Herman Van Rompuy, the European Council's president, when announcing the news in the early hours of Friday morning (21 March). He added that "banking secrecy is set to die".

The new rules will, from 2016, increase the range of information automatically exchanged by tax authorities in the member states in relation to savings accounts. Member states already exchange tax information under a 2005 directive.

The legislation approved tonight at a summit of EU leaders in Brussels was proposed in 2008 to close loopholes in the rules.

Luxembourg and Austria resisted the proposal because of fears that their financial sectors would be badly affected and risked losing customers to jurisdictions with less transparency, such as Switzerland, Andorra or Lichtenstein.

They have been able to block the deal because under EU rules each member state has a veto over legislative proposals dealing with taxation.

In order to broker a compromise, member state leaders last year asked the European Commission to negotiate similar rules with five low-tax jurisdictions on the European continent: Switzerland, Lichtenstein, Andorra, San Marino and Monaco.

These negotiations have progressed well enough for Luxembourg and Austria to drop their opposition to the deal, the two countries said today. Werner Faymann, Austria’s chancellor, said: “We cannot always wait for everyone to agree, this must not be an excuse not to do anything.”

Xavier Bettel, Luxembourg’s prime minister, said that his country's conditions had been met and described the deal as a “defining moment”.

At the international level, the OECD is developing its own standard on the automatic exchange of tax information. Last month, finance ministers from 20 of the world’s largest economies committed themselves to implementing it.

A number of NGOs strongly supported the proposal, arguing that it would make national tax systems fairer and help fight tax evasion in the developing world.

Natalia Alonso, the head of Oxfam’s EU representation, said: “Today’s decision marks a major step in the fight against tax evasion. From now onwards, European governments will have in place a check on the € 850 billion lost in tax evasion each year in the EU, which could pay for public services at home and in poor countries."