Austria Stands Firm on Bank Secrecy—for Now

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Asset Protection BLOG - Mark Nestmann: Austria Stands Firm on Bank Secrecy—for Now.

I'm not a fan of the Soveriegn Society. I know, becasue they tell me so, that the feeing is mutual. But you have to know what the dark side is doing so I read some of their material. This one caught my attention:

The last 18 months have brought unprecedented pressures on offshore centers to relax bank secrecy laws, particularly in relation to tax investigations.

While Switzerland has been the centerpiece in the global campaign against bank secrecy laws, it's hardly been the only jurisdiction targeted in this regard. Another of our favorite offshore centers—Austria—has also been targeted.

Austria, along with Switzerland and numerous other countries with bank secrecy laws, wants to be removed from the OECD's "grey list" of countries that are allegedly not in full compliance with international tax cooperation rules—set, naturally enough, by the OECD.

This "international standard" requires Austria (or any other country on the grey list) to release information on financial accounts held by a foreign investor at the request of foreign tax authorities. The request may be in regard to any tax inquiry—civil, criminal, or administrative. The country receiving the request may not invoke a domestic bank secrecy law to block it. Further, the OECD has demanded that grey-listed countries ratify at least 12 "tax information exchange agreements" with other countries. Only after all these demands are met will a country be removed from the grey list.

However, on July 9, Austria's Parliament failed to approve a resolution relaxing the country's strict banking secrecy laws as the OECD demands. Because these laws are of "constitutional rank" in Austria, the amendment needed two-thirds approval to be adopted.

For the moment, Austria's non-OECD-compliant bank secrecy law remains intact. Austrian authorities will only release account data to foreign authorities if a criminal proceeding is underway in that country against a named individual. In addition, authorities must convince an Austrian court to order the data to be released.

Continued OECD saber rattling will likely force the Austrian government to re-introduce the amendment later this year. For instance, the OECD could move Austria to a "blacklist" of uncooperative tax havens, which could have the effect of isolating the country from the global financial system. Austria was removed from this blacklist in March 2009, when it agreed to accept the OECD’s standards on information exchange.

Blacklisting would likely make it more difficult for Austrian companies and the Austrian government to borrow money from international sources. It would also mean that individuals and companies doing business in Austria face greater scrutiny from their domestic tax authorities.

Notwithstanding these threats, without a great deal more support from ordinary Austrian citizens for weakening secrecy laws, they're likely to remain intact.

Could little Austria be the "test case" for the OECD's anti-bank secrecy campaign? It may well be if the Austrian Parliament fails to deliver the reforms the OECD demands.

Of course, the Sovereign Society wants secrecy to be maintained: it is the shield behind which they say they shelter wealth just as much as we see it is the prime vehicle that promotes abuse.

Intertesting too that they pick out the issue in a little known secrecy jurisdiction: Austria.

Of course Austria can refuse cooperation. That is its choice. But the sanctions that will follow, despite it being a member of the EU, will be significant, and appropriate. Those who hide crime must pay the price for doing so. Austria will if it holds out.

And there's really not much more to this debate than that, despite the spin the Sovereign Society would like to put on this.