Administering instead of hiding

LUXEMBOURG’S financial elite gathered recently for the grand opening of its free port, which will soon house troves of fine art, vintage wine, precious metals and other valuables, beyond the reach of any taxman. The facility is one of the three finest of its kind, along with those in Singapore and Geneva. Local moneymen hope it will add to Luxembourg’s allure as a wealth-management centre.

Aside from its multilingualism and its location at the heart of Europe, Luxembourg’s main attraction as a financial centre has been its forgiving approach to taxation, for both individuals and businesses. Yet that selling-point is under threat. Global moves towards more systematic exchange of tax information have dealt a blow to the bank secrecy that made Luxembourg a Swiss-style haven within the European Union. The country is also one of the main targets of an international push, led by the OECD and the European Commission, to close loopholes that allow multinationals to massage down their tax bills. Brussels is investigating the Grand Duchy’s arrangements with Amazon and Fiat, suspecting that they constitute illegal state aid. With the holding companies or finance and treasury operations of thousands of other firms located in Luxembourg for tax reasons, more probes are likely to follow.