Transcript
A (0:00)
Across the UK, this is BBC Radio 5 live. Apple Night with Dotson Adebayo.
B (0:08)
Luxembourg, seen as one of the EU's tax havens, says it will consider greater transparency in its banking sector. Although Luxembourg is the second smallest country in the eu, it's one of the wealthiest banks and other financial institutions there have assets worth more than 20 times the country's economic output. That's raised concern that it could become the next Cyprus. Alex Cobham is a senior fellow at the center for Global Development in Washington. How serious a concern is that, Alex, that Luxembourg could go the way of Cyprus?
A (0:44)
Well, good evening, Dalton. It's quite a serious concern, as you say, Luxembourg, on that ratio of bank assets to gdp, looks much more vulnerable than Cyprus. But having said that, we should remember that Cyprus suffered, or rather its banks suffered, from the middle of 2011 from its particular exposure to the problems in Greece, whereas the Luxembourg banks have been doing relatively well over the last couple of years. But I think it's clear that, you know, increasingly, politicians are waking up to the risk that's encapsulated by that ratio of bank assets to gdp. And at the same time, the pressure on tax havens has never been greater. Luxembourg is one of the last two countries in the European Union to hold out against exchanging tax information automatically with other members, Austria being the other. And I think the fact that we've seen Luxembourg start to shift its position is indicative of the kind of pressure that's on now. People know that the behavior of Luxembourg and other jurisdictions is really undermining tax revenues at a time when that's really vital. And I think we're seeing the start of a process that will ultimately lead to automatic exchange of information. And that's really, in many ways, going to be the beginning of the end of tax havens.
B (2:13)
And is Luxembourg a tax haven simply because it doesn't reveal its financial or the financial secrets of the depositors to its bank accounts?
A (2:26)
Well, I'd say at the center, we prefer the term secrecy jurisdiction, because really, it's not so much about a low tax rate, it is about secrecy. And on that basis, Luxembourg certainly qualifies. It has one of the strongest banking secrecy setups in the world. On the Financial Secrecy Index produced by the Tax Justice Network, which is really an index of tax havens, Luxembourg comes in third, even though that's third globally, even though this is a country that only has a population of around half a million people. That shows you just how strong its secrecy is and how big, how important a jurisdiction it is in terms of Secretive financial flows.