EU nations agree on rules to fight tax evasion

European Union nations agreed on a sweeping policy to fight tax evasion after tiny Luxembourg dropped its reservations to new rules which render its secretive banking culture more transparent.

Luxembourg Prime Minister Xavier Bettel confirmed at yesterday's summit of EU leaders "the willingness of the government to take that road," a key step to scrap the banking secrecy for foreigners.

EU President Herman Van Rompuy yesterday said the move was "indispensable for enabling the member states to better clamp down on tax fraud and tax evasion."

The legislation proposes an EU-wide automatic exchange of data on bank deposits to allow governments to identify and pursue tax evaders with foreign accounts on home soil.

The Grand Duchy of Luxembourg was long seen as a paradise for tax evasion because of slack regulation, lax taxes and its famed secrecy that drew everyone from Belgian dentists to international investors looking for ways to launder money.

Even with a population of about 500,000 citizens, it turned into one of the wealthiest nations in the world because it could rely on a banking and financial industry which has more than $4 trillion in assets.

"We have reached a new stage on the exchange of information today," Bettel said, reflecting on years of negotiations on making European banking more transparent and fraud-free.

Luxembourg resisted change because it wanted non-EU banking nations like Switzerland and Liechtenstein to also sign up.

"This is a clear message that Europe is fully committed to the new single global standard for automatic exchange of tax information," Van Rompuy said.