During the weekend of November 21/22, 2013 the 6th Meeting of the OECD group Global Forum on Transparency and Exchange of Information on Tax Matters (“Global Forum”) took place. The Forum has now evaluated in 100 jurisdictions the legal framework and implementation practices with respect to transparency and information exchange in tax matters. This occurs in several phases. Austria, like a number of other countries, has now completed phase two, a peer review process focusing on implementation and actual practice.
At the occasion of this meeting, an Annual Report was published which shows that Austria is ranked only “partially compliant” – the third best or last but one ranking (compliant, largely compliant partially compliant, non-compliant). This verdict is mainly due to lacking sanctions when ownership of shares is not identified (beneficial owner information), incomplete rules and practice regarding access to information, information exchange networks and slight problems with confidentiality rules. Again, Austria’s non-participation in the EU automatic information exchange efforts is criticized.
Already in 2009 Austria was judged a problem jurisdiction, which was alleviated when Austria joined OECD’s Convention on Mutual Administrative Assistance on Tax Matters, now it is in bad company once more. A number of caveats, however, applies to this ranking. It is surprising that a number of countries, known globally as tax havens, e.g. in the Caribbean, is ranked higher than Austria. Might this have to do with the fact that some of these countries are surprisingly well represented in the governance structures of the Global Forum? Also, the specific rankings are not real-time evaluations, but in Austria’s case are based on 2011 data. In the meantime, a number of improvements have occurred, according to Ministry of Finance experts.
Still, this Annual Report once more puts Austria in an undesirable limelight, giving it the image that it still tries to attract international non-taxed, maybe illegally gained, funds, and in this way is a laggard with respect to international efforts to clean up this area by means of transparency, strict rules, data exchange and mutual assistance, requiring only low-level barriers. This ranking is also important for International Financial Institutions, such as the World Bank, IFC, EBRD, etc. – many of which base their own rules on the acceptability of jurisdictions on the Global Forum’s verdicts. In concreto, this ruling might make it difficult for e.g. EBRD to finance projects in its client countries, sponsored by Austrian firms or banks.
The Austrian chapter of Transparency International, in addition to a number of other persons and institutions, has repeatedly pointed to such problems and asked the government to respond unequivocally. Let me remind the readers of the sorry fact that last spring the Austrian Federal Chancellor and his Minister of Finance presented opposite views relative to Austria’s participation in the EU’s automatic information exchange. To this day, Austria has not joined that consensus.
The publication of this Report once more is a sad day for Austria’s reputation in the world. This is corroborated by the most recent publication of Transparency International’s Corruption Perception Index 2013, where Austria has slipped another notch down from the already low place, to 26. While official Austrian sources may point to the weaknesses of these rankings and to more recent improvements, the fact remains that Austria is seen as a non-transparent jurisdiction, attempting to shield dodgy money.
It is also telling that at this important meeting in Djakarta no Austrian representative was present. Austria is also not represented in the governance structures of the Global Forum, or similar institutions. The incoming Austrian government should make strong efforts to elevate Austria to the ranks of the most transparent and most compliant countries.