Speaking at the Association of Luxembourg Fund Industry (Alfi) conference in Luxembourg on Wednesday, Gramegna said he has recently met with Australia’s finance minister Mathias Cormann to discuss setting up a new tax treaty that would mean residents with income and gains in one country while living in another do not have to pay tax twice.
“In Australia, my counterpart Mathias Cormann and I agreed that now the time had come for Luxembourg and Australia to look into the possibilities of signing a double taxation agreement (DTA).
“Until now, the Australians had previously ruled this out because Luxembourg as a country did not meet the standards in terms of transparency and tax matters that Australia was calling for which are the international standards of the OECD,” he said.
Gramegna added that over the past year Luxembourg has improved tax transparency to become compliant with OECD standards.
“I was able to reassure my counterpart that for more than a year now Luxembourg is largely compliant and in the same category as Australia, the UK and the US,” he said.
Earlier this month, Luxembourg signed an automatic exchange of information agreement with Singapore, set to go live from January 2018, which he believes will improved the reputation of Luxembourg as a financial centre.
Tax haven status
In 2014, Luxembourg became embroiled in the LuxLeaks scandal where leaked documents exposed how it struck “secret deals” with 340 international companies – including Apple, Ikea and Pepsi – enabling them to save billions in their global tax bills.
The latest results from the Financial Secrecy Index (FSI), which ranks jurisdictions according to their secrecy and the scale of their offshore financial activities, put Luxembourg at number six of a list of countries that use secrecy to attract illicit and illegitimate or abusive financial flows.
Switzerland, Hong Kong, the US, Singapore and the Cayman Islands – all well-known tax havens – make up the top five of FSI jurisdictions where wealth is either untaxed or very lightly tax.
Panama paper investigation
Luxembourg was also implicated in the Panama Papers scandal which exposed who the rich and powerful around the world set up offshore shell companies in tax havens such as Luxembourg to avoid paying tax on their wealth.
The scandal prompted 25 EU-member countries and the offshore centres of the Isle of Man and Gibraltar sign a deal last year setting up a confidential beneficial ownership register.
Gramegna revealed that Luxembourg’s financial services regulator, the Commission de Surveillance du Secteur Financier (CSSF), is currently investigating the banks based in Luxembourg over their links to the Panama Papers expose.
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