Luxembourg banking secrecy is not as old as the hills
“There is a deliberate confusion between the professional secrecy obligation of the banker and a tax administration’s right to access banking data.” These are the words of Jean-Jacques Rommes, General Manager of the Luxembourg Bankers’ Association (ABBL) at a Conference organised by the University of Luxembourg in cooperation with the International Fiscal Association. According to the speaker, the culprits are everywhere.
Jean-Jacques Rommes names three guilty parties for this amalgam. “Professionals themselves have “sold” banking secrecy using this characteristic, clients have “bought” it for this reason and States who see us as a tax haven have clearly not described their version of reality in a much nuanced manner”.
The General Manager of the Luxembourg Bankers’ Association held a speech at a conference in Luxembourg called: Exchange of information and bank secrecy. He reminds the audience of the fact that although banking secrecy was only given legal status in the 1980s, its origins do however date back to the origins of all professional secrecy that we have encountered since antiquity.
Liberal professions, which were the first to establish rules defining the obligations resulting from the exercise of their profession, are typically subject to professional secrecy. This classical deontological obligation also extends to financial professions.
Valid arguments to preserve confidentiality
In his speech, Jean-Jacques Rommes doesn’t beat about the bush. “Banking secrecy is not only under attack in those countries that consider themselves to be the direct victims of this Luxembourgish tradition. The international trend of considering transparency to be a virtue under all circumstances and confidentiality a vice, has seen a strong rise in popularity as a result of the crisis”.
Nevertheless, Luxembourg has valid arguments to explain the virtues of financial confidentiality. According to ABBL’s General Manager, the exchange of information in Europe works poorly, is completely out of proportion to its usefulness and risks restricting capital flows between member states. On the contrary, a pan-European withholding tax would be a simple and efficient means to rapidly levy important tax revenues.
Jean-Jacques Rommes doesn’t think it would be a good idea if Luxembourg vetoed at the European level eternally. Maintaining a negative attitude would mean losing any chance for political manoeuvring in finding a solution. Ceding to the proposal currently on the European table is not a good idea either.
But there is a third alternative which he recommends. “We have no other choice but to establish as quickly as possible the dialogue with our European partners and especially with our closest neighbours.” CW