The campaign group Tax Justice Network has just published the Financial Secrecy Index, a list of the world’s secrecy jurisdictions, in which Luxembourg ranks second. First of all, the ABBL does not consider Luxembourg to be a “secrecy jurisdiction”. In both penal and fiscal matters, Luxembourg already cooperates more fully on an international basis than most countries in the world. Indeed, Tax Justice Network’s decision to only review what it considers to be “secrecy jurisdictions” is symptomatic of a report that is prejudiced from the start and works on the principle that the accused is guilty before being tried. While we appreciate that TJN has broadened its list to 60 jurisdictions, and thus including countries that had been conveniently forgotten by the G20, we find it surprising that TJN has not included all of the 87 jurisdictions reviewed by the OECD, all of which have statutory banking secrecy. This is especially regrettable considering that TJN bases its research largely on OECD tax cooperation reports. Readers thus will be led to wrong conclusions with regards to the seeming transparency of non-reviewed countries (France, Germany, etc.).
In terms of methodology, we also regret that a report that is officially launched in November 2009 has only managed to include sources that merely go up to 31 December 2008. And while research on Tax Information Exchange Agreements does go up to 30 June 2009, it is important to note that Luxembourg has made significant progress since then. Luxembourg was already taken off the infamous “grey list” in July and currently has signed 19 double tax treaties following the OECD standard. This means that the non-averted reader is faced with an entirely out-of-date report at precisely a moment in history when the financial world, and international tax cooperation more specifically, evolves at such a fast pace.
Not only are many of the sources outdated, but, more significantly, TJN often draws overly simplistic or perilously wrong conclusions. In addition, some statements or facts are simply incorrect. The result of all of the above is an utterly biased view of Luxembourg. A striking example of this biased approach is the fact that under “Other data” it is held against us that we have a significant presence of Big 4 firms in our jurisdiction because it illustrates that the jurisdiction “hosts a significant international activity”. However, it is precisely because Luxembourg is a predominantly international financial centre that the presence of the Big 4 plays an indispensible auditing role, ensuring the transparency of business transactions.
There are indeed a great number of such instances in the report where data is misinterpreted, sometimes deliberately, or where incorrect data is used. We only limit ourselves to mentioning a few examples here that sufficiently illustrate the mind-set underlying the report. Thus, the report argues that because there is apparently no data available on the number of lawyers and accountants that “Luxembourg may exhibit a significant number of lawyers and accountants when compared to other secrecy jurisdictions”. Not only is the reasoning itself undertaken in bad faith, but a simple web search would have revealed that the data on lawyers and accountants is very much publicly available, since anyone exercising any of these professions in Luxembourg is required to register with the Luxembourg Bar or the Order of Accountants, respectively (lawyers are listed on www.barreau.lu [1], while accountants are listed on www.oec.lu [2]).
The Key Financial Secrecy Indicators, used to determine transparency and opacity, and the interpretation of findings are often similarly skewed and biased. Points are deducted because there are no trusts on public record, for example. The report fails to point out, however, that there are no trusts in Luxembourg. And while it is true that trusts can be managed out of Luxembourg, this is also the case in many non-reviewed jurisdictions (like Germany or France, for instance, which has its own trust law). Moreover, banks in Luxembourg keep track of beneficial owners.
Some criteria, like responding to TJN requests for information (ironically, one of the few points where Luxembourg scored positively according to TJN), are entirely subjective and only seem to serve the purpose of inflating TJN’s sense of authority and self-importance.
One statement (and criteria) that we strongly oppose is the accusation that Luxembourg does not participate in the European Savings Directive. Just because TJN believes that only those countries that apply an automatic exchange of information participate in the European Savings Directive, does not make it so. Not only does Luxembourg apply one of the systems foreseen by the European Savings Directive, namely a withholding tax, the jurisdiction also offers clients the possibility to opt for tax declarations. Incidentally, we noticed that the UK scores positively on this point, simply because it chose to apply the automatic exchange of information regime rather than a withholding tax. However, the European Commission’s evaluation report shows that, even though the UK has committed itself to an automatic exchange of information, it does not seem do so in practice. There simply was no data from the UK available to the Commission for 2006, for instance. Thus, the UK gets full marks from TJN for “fully” participating, even though this is clearly not the case.
Significantly, the report is entirely wrong in its conclusions about Luxembourg. Not that we are particularly surprised by this fact. The report does indeed tick all the boxes when it comes to the common prejudices and disinformation that Luxembourg has been fighting for many years. The ABBL can thus only deplore a further so-called expert report rife with foregone conclusions that merely confirms the prejudices of its authors.
Links:
[1] http://www.barreau.lu
[2] http://www.oec.lu