The cat is out of the bag
“The switch to the automatic exchange of information comes as no surprise and it made sense that finance minister Luc Frieden made this announcement now”. These are the words of ABBL Chairman Ernst Wilhelm Contzen at a press conference after the general meeting of the Luxembourg’s Bankers’ Association (ABBL).
The chairman of the ABBL named reasons why he fully supports Minister Frieden’s announcement that Luxembourg will apply the automatic exchange of information and thus give up the withholding tax model. During a press conference, Mr Contzen reminded the audience of journalists that since he became the chairman of the ABBL three years ago, he has been strongly advocating a tax compliant business model: the only sustainable standard for the financial centre.
He is convinced that this will help Luxembourg to not be perceived as the villain by the public eye anymore. In the discussions around the automatic exchange of information, Ernst Wilhelm Contzen didn’t like the fact that the large countries of the EU tried to deprive Luxembourg of the fundamental rights that are established in the Treaty of Rome.
“There is the freedom of movement for persons, goods, services and capital. Luxembourg, like the United Kingdom, has decided to focus on the service industry – Luxembourg more specifically on finance services –, which we export to the whole EU and around the world. The attitude of large EU states is the wrong approach because every citizen of the European Union has the right to open his account where he wants to and the right to choose in which country his money is managed”.
Carlo Thill is Vice-Chairman of the Bankers’ Association ABBL. He underlines that the local banking industry has long been prepared to switch to an automatic exchange of information. Now that the cat is out of the bag, it is easier for banks to reassure clients, because they now know that Luxembourg will give up the withholding tax model and switch to the automatic exchange of information as of January 1st 2015.
Carlo Thill did not conceal that this change of business model in wealth management will result in job losses; he adds that it is hypothetical to speculate about the number of losses and impossible to foresee how many banks there will be in Luxembourg in the future. At the same time, opportunities are looming because smaller customers will be “replaced” by wealthier customers, he adds and emphasises that the finance industry shouldn’t be too pessimistic.
“I have learned from the experience of the last years that a lot of customers decide to stick with their banks in Luxembourg despite the fact that they have become compliant with the tax authority of their home country. The challenge of Luxembourg-based banks is now to convince those clients who have not been tax compliant but decide to do so to stay”.
During the press conference, ABBL’s CEO, Jean-Jacques Rommes highlighted ten factors that have made the Luxembourg financial centre very successful but which have to be questioned. He named amongst others sound public finances, qualified staff, an internationally-oriented finance industry and competitive labour costs. Mr Rommes named another trump card, which has to be preserved in order to remain competitive: the predictability of decisions taken by government.
“Decisions taken by successive governments have traditionally been very predictable because there has always been a large consensus when it comes to the importance of the financial centre for the national economy. I appreciate that during his State of the Nation speech a couple of weeks ago Prime Minister Jean-Claude Juncker disclosed that corporate tax would not be raised”.
ABBL Chairman Ernst Wilhelm Contzen proves himself very pugnacious when it comes to defending the values of the Luxembourg financial centre, number one in private banking in the Eurozone and number two worldwide behind the US in investment funds. He has highlighted that entrepreneurs, who have often taken a lot of risks throughout their lives, get something in Luxembourg they can’t find in many other financial centres and that is planning reliability.
These business people want to rely on people who take decisions for the long run. Luxembourg is the place of choice for these people and other clients too, because the country offers stable legislation and stable governments whatever the coalition in power may look like. CW