VZCZCXRO0448
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV RUEHSL RUEHSR
DE RUEHVI #1212 2641232
ZNR UUUUU ZZH
P 211232Z SEP 09
FM AMEMBASSY VIENNA
TO RUEHC/SECSTATE WASHDC PRIORITY 3340
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
INFO RUCNMEM/EU MEMBER STATES

UNCLAS VIENNA 001212 
 
SIPDIS 
 
TREASURY FOR FTAT, OCC/SIEGEL, AND OASIA/ICB/MAIER 
TREASURY PASS TO FEDERAL RESERVE AND SEC/E. JACOBS 
PARIS FOR OECD/O'REILLY 
 
E.O. 12958: N/A 
TAGS: EFIN AU
SUBJECT:  Austria Implements Bank Secrecy Reform;  Determined to 
Exit "Grey List" 
 
REF:  (A) VIENNA 1088; (B) VIENNA 0847 
 
¶1. SUMMARY:  On September 1, Austria's Parliament approved a new law 
lifting bank secrecy in tax information exchange cases involving 
non-citizens.  The GoA has moved swiftly to sign enough amended 
double taxation conventions  to have the OECD remove Austria from 
its "Grey List" (jurisdictions that withhold information from 
foreign tax authorities) PRIOR to the G-20 Pittsburgh Summit 
September 24-25.  Once Austria is off the list, the GoA says it will 
renegotiate other tax bilaterals, including the U.S. agreement, but 
these will take time.  END SUMMARY. 
 
¶2. Following political concessions to two opposition parties (on 
unrelated issues), a special plenary session of Parliament on 
September 1 approved a bill partially lifting bank secrecy for 
foreigners, with support from the governing parties and the 
opposition Greens and BZO.  The new law, a significant step towards 
greater financial transparency, went into effect September 9. 
 
¶3. To minimize domestic fallout, the GoA avoided directly amended 
bank secrecy language in the Federal Banking Act (a "sacred cow" in 
Austria).  Rather, it engineered the change via separate legislation 
which regulates provision of account information to foreign tax 
authorities (Law on Procedures for Administrative Aid, Federal Law 
Gazette number I/102 of September 8, 2009).  The new law stipulates 
that banks must provide all available information, even information 
covered by bank secrecy, in cases of foreign "letters rogatory" 
requests (based on EU Community law, double taxation treaties, or 
other international legal agreements) when those requests present 
substantial evidence of criminal wrongdoing.  The law also foresees 
that accountholders (persons who have power of disposition over bank 
accounts and are affected by the foreign letters rogatory request) 
should be informed of the request.  Austria's Finance Ministry (MoF) 
is designated as the responsible authority for enforcing the new 
law. 
 
¶4. To date, the GoA has signed at least 13 new or amended bilateral 
double taxation agreements based on the OECD Model Tax Convention. 
Several more are under way, the signing of which is just a 
formality.  Subsequent parliamentary approval of those agreements is 
also routine, requiring only a simple majority. 
 
COMMENT 
- - - - 
 
¶5. After a harsh critique at the G-20 London summit in April and at 
the hands of the European Investment Bank board in August, Austrian 
authorities wanted intensely to "graduate" from the OECD Grey List 
prior to the Pittsburgh summit -- which now appears practically a 
foregone conclusion.  On September 17, Austrian 
Vice-Chancellor/Finance Minister Josef Proell announced that Austria 
is now in full compliance with OECD tax information exchange 
standards and no longer belongs on the Grey List.  Proell emphasized 
that Austrian citizens are unaffected by the change and that the 
step was necessary to avoid Austria becoming an "outsider" and the 
target of international sanctions. 
 
¶6. Most of Austria's first 12 new/amended tax agreements are with 
small countries (including Andorra and Gibraltar), focusing just on 
compliance with OECD Article 26 language (exchange of information). 
The MoF says it plans to amend all double taxation agreements, 
including that with the United States.  Though the large majority 
follow the OECD Model Tax Convention text, some of the agreements -- 
including the Germany-Austria bilateral and potentially the 
U.S.-Austria bilateral -- may entail substantive negotiations 
requiring more time. 
 
EACHO