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Austria must get rid of banking secrecy: EU commissioner

Europe's Commissioner for Taxation Laszlo Kovacs has blasted Austria's banking secrecy laws and urged Vienna to lift them or face consequences, in an interview with an Austrian magazine.

india Updated: Feb 26, 2009 23:20 IST

Europe's Commissioner for Taxation Laszlo Kovacs has blasted Austria's banking secrecy laws and urged Vienna to lift them or face consequences, in an interview with an Austrian magazine.

"Banking secrecy should not protect fraudsters," Kovacs told the weekly Format in an interview to be published on Friday.

"It is unacceptable that banking secrecy in one (EU) member state can hamper the tax authorities of other member states," he added.

Kovacs warned of serious consequences if Austria did not lift its banking secrecy soon, as other states have already done.

"I am convinced that Austria will soon revise its position," he said, warning that Vienna would otherwise face "very difficult negotiations."

Social Democratic Chancellor Werner Faymann hit back at the accusations however, noting that "to talk of the taxation authorities work being impeded, is excessive."

"We stand by our banking secrecy," he told Format, insisting that "Austria is cooperating in the fight against tax crimes."

To lift banking secrecy laws would require the support of two-thirds of deputies in parliament and could not be achieved easily, he added.

Last week, four of the five parliamentary parties in Austria backed the secrecy laws, saying they would fight "tooth and nail" for them.

Banking secrecy has come under fire recently following a US tax probe of Swiss banking giant UBS.

In the European Union, Austria, Luxembourg and Belgium all have banking secrecy laws.

But critics say the system must be made more transparent so that financial risk can be more easily assessed and capital flows more easily monitored, two key failings contributing to the current economic crisis.