VZCZCXRO3526
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHVI #1088/01 2401341
ZNR UUUUU ZZH
P 281341Z AUG 09
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 3218
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
INFO RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 02 VIENNA 001088 
 
SIPDIS, SENSITIVE 
 
PARIS FOR USOECD 
FRANKFURT FOR IRS 
TREASURY FOR FTAT, OCC/SIEGEL, AND OASIA/ICB/P.MAIER 
TREASURY PASS TO FEDERAL RESERVE AND FINCEN 
TREASURY ALSO PASS IRS 
TREASURY ALSO PASS TO SEC/E.JACOBS 
 
E.O. 12958: N/A 
TAGS: EFIN AU
SUBJECT: Austrian Parliament to Lift Bank Secrecy for Foreigners, 
Expand Tax Cooperation 
 
REF:  A) Vienna 1076; B) Vienna 847; C) Vienna 323 and previous 
 
¶1. (SBU) SUMMARY:  On August 26, Austria's governing parties reached 
agreement with the opposition Greens and BZO on a bill which 
partially lifts bank secrecy for foreigners (in exchange for 
stronger opposition rights to invoke investigative committees and 
special state audits).  Parliament is expected to enact the bill in 
a special plenary session on September 1.  The new law is a key step 
to getting Austria off the OECD's "Grey List" of jurisdictions that 
withhold information from foreign tax authorities.  Austria's 
Finance Ministry (MoF) is currently renegotiating a number of 
bilateral double taxation treaties (it has concluded several 
already), which can enter into force as soon as the new bill is in 
place.  The move is a turnaround for Austrian authorities and a 
significant step towards greater financial transparency.  END 
SUMMARY. 
 
GoA, Opposition Make a Deal 
- - - - - - - - - - - - - - 
 
¶2. (U) After a long standoff, the GoA and two opposition parties 
(Greens and BZO) reached agreement on August 26 to lift bank secrecy 
for non-citizens in cases of suspected tax evasion or other criminal 
conduct.  Under the new law, foreign tax authorities no longr need 
an indictment to seek account information;  substantiated evidence 
of wrong-doing will suffce. 
 
¶3. (U) In exchange, the GoA agreed to oppostion demands to lower 
the bar to establish parlimentary investigative committees and, 
expand stae audit responsibilities (the audit court is now 
uthorized to investigate Austria's bank rescue pacage -- including 
the terms of GoA equity particiation in banks -- and to audit 
companies with les than 50% public ownership, but where the stat 
still has a controlling influence.  Austria's largest, far-right 
opposition party (the FPO) voiced strong critique of the new law, 
arguing that Austrians should not yield to "blackmailing" by 
international organizations. 
 
¶4. (SBU) Parliament's Finance Committee approved the bill on August 
27 with the votes of the SPO, OVP, Greens and BZO; a special plenary 
session on September 1 will  pass the bill just in time for the 
September 1-3 OECD Global Forum on tax policy (where Austrians 
expected another dollop of criticism as an uncooperative 
jurisdiction). 
 
Austria Desperate to Graduate from OECD Grey List 
- - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶5. (SBU) Passing the bill (a virtual certainty now) is an important 
milestone to getting Austria off the OECD's Grey List.  Austria is 
the last EU member country on the list, in company with San Marino, 
Monaco, Andorra, Liechtenstein, and (for now) Switzerland.  To get 
off the list, Austria must sign OECD-conforming tax information 
agreements with at least 12 partners.  The MoF is in the process of 
renegotiating bilateral double taxation treaties (negotiations are 
reportedly finished with five countries and are close to conclusion 
with seven others).  The new agreements will enter into force as 
soon as the legal basis is in place (i.e., shortly after September 
1).  COMMENT:  As noted in reftels, the GoA intends to reopen the 
bilateral U.S.-Austria taxation treaty, but not as part of the first 
tranche of revised bilaterals (i.e. more likely in 2010).  END 
COMMENT. 
 
Why & How the GoA Moved to Lift Bank Secrecy 
- - - - - - - - - - - - - - - - - - - - - - - 
 
¶6. (SBU) Mounting pressure from the EU, OECD, G-20 and lately the 
European Investment Bank (EIB -- the EU's financing arm) forced the 
GoA to move on bank secrecy, until now a "third rail" domestically. 
The GoA signaled its new approach at the time of the G-20 London 
summit in early April, but the issue quickly ran into a 
parliamentary roadblock.  The EIB's threat in mid-August to stop 
doing business with Austrian banks after March 2010 (unless the GoA 
"graduated" from the OECD Grey List) sent shockwaves through the 
financial community here.  EIB blacklisting would have hit Austrian 
banks hard, since they work closely with the EIB on projects in 
Central, Eastern and Southeastern Europe (the EIB also finances 
about EUR 1.2 billion annually in Austria itself). 
 
¶7. (U) To maintain secrecy for Austrian citizens and avoid amending 
the Banking Act directly (a highly charged political topic) the GoA 
came upon the idea of amending separate legislation (Law on 
Procedures for Administrative Aid) to expand the cases in which the 
GoA can authorize banks to provide account information to foreign 
 
VIENNA 00001088  002 OF 002 
 
 
tax authorities.  Even with the revised law, cooperation will be 
only on request -- automatic data exchange is not/not foreseen. 
Further procedural detail is regulated by bilateral tax treaties. 
(NOTE:  Even this small change still requires a 2/3 majority 
approval in Parliament, since it indirectly affects bank secrecy). 
Speaking for the two coalition parties, FinMin / Vice Chancellor 
Josef Proell and State Secretary Andreas Schieder defended the new 
law as necessary to avoid serious economic damage to Austrian 
interests. 
 
COMMENT 
- - - - 
 
¶8. (SBU) Faced with growing outside pressure -- most recently, the 
EIB's threat to shut out Austrian banks in Eastern Europe -- the GoA 
completely acquiesced to opposition demands to get the necessary 
super-majority.  Within Austria, the new audits will mean an 
embarrassing look into cost explosions at Vienna Airport (NOTE: the 
airport is 40% publicly owned by representatives of both big 
parties) and may lead to airing of other "dirty laundry" given the 
tradition of dividing spoils among Austria's two large parties. 
 
¶9. (SBU) Since March, Austria's body politic (with the exception of 
the far right) has changed its tune significantly on bank secrecy 
and tax information exchange.  Pressure from the G-20 summit in 
London, OECD partners, the FATF (indirectly), and powerful EU member 
states like Germany convinced the GoA and key industry leaders that 
Austria cannot afford to uphold bank secrecy as a "holy cow" (it 
also helped that the GoA can basically exempt Austrian citizens from 
information exchange).  In sum, the latest move is a significant 
step towards greater transparency in financial dealings involving 
Austrian counterparts. 
 
EACHO