Austria Implements Bank Secrecy Reform; Determined to

UNCLAS VIENNA 001212 SIPDIS TREASURY FOR FTAT, OCC/SIEGEL, AND OASIA/ICB/MAIER TREASURY PASS TO FEDERAL RESERVE AND SEC/E. JACOBS PARIS FOR OECD/O'REILLY E.O. 12958: N/A TAGS: EFIN AU SUBJECT: Austria Implements Bank Secrecy Reform; Determined to Exit "Grey List" REF: (A) VIENNA 1088; (B) VIENNA 0847 ¶1. SUMMARY: On September 1, Austria's Parliament approved a new law lifting bank secrecy in tax information exchange cases involving non-citizens. The GoA has moved swiftly to sign enough amended double taxation conventions to have the OECD remove Austria from its "Grey List" (jurisdictions that withhold information from foreign tax authorities) PRIOR to the G-20 Pittsburgh Summit September 24-25. Once Austria is off the list, the GoA says it will renegotiate other tax bilaterals, including the U.S. agreement, but these will take time. END SUMMARY. ¶2. Following political concessions to two opposition parties (on unrelated issues),a special plenary session of Parliament on September 1 approved a bill partially lifting bank secrecy for foreigners, with support from the governing parties and the opposition Greens and BZO. The new law, a significant step towards greater financial transparency, went into effect September 9. ¶3. To minimize domestic fallout, the GoA avoided directly amended bank secrecy language in the Federal Banking Act (a "sacred cow" in Austria). Rather, it engineered the change via separate legislation which regulates provision of account information to foreign tax authorities (Law on Procedures for Administrative Aid, Federal Law Gazette number I/102 of September 8, 2009). The new law stipulates that banks must provide all available information, even information covered by bank secrecy, in cases of foreign "letters rogatory" requests (based on EU Community law, double taxation treaties, or other international legal agreements) when those requests present substantial evidence of criminal wrongdoing. The law also foresees that accountholders (persons who have power of disposition over bank accounts and are affected by the foreign letters rogatory request) should be informed of the request. Austria's Finance Ministry (MoF) is designated as the responsible authority for enforcing the new law. ¶4. To date, the GoA has signed at least 13 new or amended bilateral double taxation agreements based on the OECD Model Tax Convention. Several more are under way, the signing of which is just a formality. Subsequent parliamentary approval of those agreements is also routine, requiring only a simple majority. COMMENT - - - - ¶5. After a harsh critique at the G-20 London summit in April and at the hands of the European Investment Bank board in August, Austrian authorities wanted intensely to "graduate" from the OECD Grey List prior to the Pittsburgh summit -- which now appears practically a foregone conclusion. On September 17, Austrian Vice-Chancellor/Finance Minister Josef Proell announced that Austria is now in full compliance with OECD tax information exchange standards and no longer belongs on the Grey List. Proell emphasized that Austrian citizens are unaffected by the change and that the step was necessary to avoid Austria becoming an "outsider" and the target of international sanctions. ¶6. Most of Austria's first 12 new/amended tax agreements are with small countries (including Andorra and Gibraltar),focusing just on compliance with OECD Article 26 language (exchange of information). The MoF says it plans to amend all double taxation agreements, including that with the United States. Though the large majority follow the OECD Model Tax Convention text, some of the agreements -- including the Germany-Austria bilateral and potentially the U.S.-Austria bilateral -- may entail substantive negotiations requiring more time. EACHO