Ethics and governance in the European Financial centers

In a recent press release Angel Gurria from the OECD stated that “agreements with six of its key economic partners show that Luxembourg has joined the international drive to combat tax havens and is moving swiftly towards substantial implementation of the OECD standard.”

Considering that the agreements do not have as an aim an automatic exchange of banking information and do not authorize general requests i.e. fishing expeditions as confirmed by Mr Angel Gurria in a letter to Luc Frieden that the Luxembourg Government published ;

Considering that only accurate requests will be satisfied: “where information is requested, it must be exchanged only where it is "foreseeably relevant' to the administration or enforcement of the domestic laws of the treaty partner. Countries are not at liberty to engage in 'fishing expeditions" or to request information that is unlikely to be relevant to the tax affairs of a given taxpayer. In formulating their requests, competent authorities should demonstrate the foreseeable relevance of the requested information” (A. Gurria to L. Frieden, 13 March 2009);

Considering that it will be a long shot for competent tax authorities to demonstrate the foreseeable relevance of the requested information;

Considering that the "foreseeable relevance" of the requested information will be at the discretion of country where the evasion take place;

Considering that in any event for accepted requests there will be delays for foreign tax administrations to obtain the requested data, like it is for the “letters of request” (to foreign courts);

Considering that in Luxembourg bankers welcome tax evasion that is not repudiated all the more than they consider that it is not their duty to control if the taxpayer was honest (Cf. Lucien Thiel’s doctrine: he is the former chairman of the Luxembourg Bankers’ association, and one of the founders of the LIGFI);

Considering that Swiss professional recently admitted the OECD tax model is a charade to counter tax evasion (According to Thomas Kalbermatten, bank Analyst at Credit Suisse, quoted by Le Temps, "Il sera, en pratique, très difficile pour les autorités fiscales étrangères qui appliquent les standards de l’OCDE de fournir ce degré de details" (free translation: “It will be, in practice, very difficult for the foreign tax authorities which apply the OECD standards to provide this degree of details”; according to Didier de Montmollin, partner at Secretan Troyanov, quoted by Le Temps, "Si la Suisse va dans la même ligne que le Luxembourg, le résultat ne sera pas du tout si problématique pour la Suisse. Le secret bancaire sera relativement préservé, et le client restera maître de son éthique fiscale". (free translation: “If Switzerland goes in the same line as Luxembourg, the result will not be so problematic  at all  for Switzerland. Banking secrecy will be relatively preserved, and the client will keep his/her tax ethics under control”)  

Considering that it result from the above that many tax payers that commit fraud neither will be dissuaded nor will be detected

The international drive to combat tax havens, as promoted by the OECD, and the swift move towards substantial implementation are a charade, so was the OECD list.

Luxembourg, and every jurisdiction, will be credible in their will to combat tax evasion when they vote at least a legal and regulatory framework to criminalise tax evasion, like AML legal and regulatory framework, with dissuasive sanctions.

Such framework would make useless the automatic exchange, provided that the sanctions are both dissuasive and effective, and are not made difficult even impossible in practice by a subtle formulation (like “knowingly”, added to the Luxembourg AML law).

Subsidiary questions:

-         By the way, what about Luxembourg’s situation in the international drive to combat corruption especially, with the criminal liability of legal persons and in general in the implementation of OECD or GRECO Recs?

-         By the way, what about Luxembourg’s actual framework on the depositary’s liability regarding the UCITS directive despite a misleading communication on the “faithful transposition” (I know that the OECD did not communicate on Madoff despite it is a very interesting case study of the perfectible governance in Luxembourg where EVERYONE - leaders and powerhouses, politicians and professionals, regulator - did not tell the truth. Why would they be trusted in their move towards substantial implementation of the OECD standard? Once a liar always a liar…