Watch: peckvillchen.blogspot.com

There are new fun postings in Luxembourgish. Why not learn another language?

Luxembourg: Time for Introspection.

I remember the time of several great Luxembourg Statesmen: Joseph Bech and Pierre Werner who efficiently navigated the course between the conflicting interests of our bigger neighbors and Gaston Thorn, certainly exhibiting a different style, but as successful on the international scene as his two predecessors. And yet, despite their efforts not to hurt our neighbors’ sensitivities, they were not of the kind to give in easily when they neighbors pressured us. They very often actually avoided pressures quite artfully.

Recently, almost all our leaders got into a competition about who among them could blow his horn more forcefully, to protest a general assault on Luxembourg's banking secret. They promised the mother of all battles, and the echo from abroad promised the same.

I want to share a personal experience that I had with Pierre Werner that I never forgot. He was the father of the Luxembourg satellite company. That project was certainly not to the liking of French President François Mitterrand. When eventually the launch of the first Luxembourg satellite was scheduled, I traveled with the Crown Prince of Luxembourg and Mr. Werner to Kourou, French Guyana in December of 1988. The French officials in place were obviously uncertain about protocol arrangements, as French Presidential sensitivity was in the air. After the launch, the Crown Prince did two announcements, one in Luxembourgish and one in English, none in French. Pierre Werner told me that it was a missed occasion to mend the fences, which traditionally we would always try to do. He didn’t want to break any Limoges porcelain, and therefore got his satellite flying.

The shrill display of holy anger that our men in the arena exhibited lately demonstrates that they obviously skipped many classes from the great teachers mentioned above. They did break the Limoges set, and yet there is no banking secret anymore.

Some haven’t noticed yet and are still tooting their horns. What is Luxembourg to do? (And also Austria, Liechtenstein Switzerland, Cayman and all the others). Only one thing: COMPLIANCE.

There is no way around compliance with OECD standards to get off the grey list of tax havens. Eventually anti tax haven compliance requirements will merge with those of anti money laundering and counter terrorist financing.

There should be no weakness in Luxembourg’s overall compliance. OECD rules and FATF recommendations may be imperfect. Luxembourg’s compliance with them should be perfect. There is no room left for another blow at our reputation. OECD and FATF might be criticized for lax regulations. Luxembourg doesn’t have that luxury.

It would even be thoughtful to start preparing for yet another requirement in the future: avoiding the upcoming list of judiciary and regulatory havens. I’ll use my personal experience in Luxembourg as a demo, a practical guide through the concept of the judicial and regulatory haven, all the while poking some fun into it. Sorry, it will be in Luxembourgish mostly, on my blog that is peckvillchen.blogspot.com. That dirty linen cannot be washed in English.

New Post

Please see this post in French at my other blog:
http://feierwon.blogspot.com/2009/05/la-paix-t-elle-eclate.html

Luxembourg and Liechtenstein Enter Talks on Tax Agreement

This was reported in international news media over the weekend. As the language used by news agencies adds a little confusion to the confusion that exists anyway over OECD standards, it is probably going to be an agreement on exchange of information on tax matters between the two countries. Compliance with those OECD standards is the goal.

This is of course in response to both countries’ grey-listing by the OECD/G20 duo in April. It is somewhat funny that OECD criteria to get off the grey list are to have at least 12 of those bilateral agreements in place. This sounds a little bit bizarre as a behavioral code between nations, and is reminiscent of boy scouts collecting badges. There will certainly be some jokes about which exotic place exchanges badges with which other one.

Luxembourg has to have a lucid look back at its mismanagement of the tax haven issue. It has surfaced more than 10 years ago. Initially at least, it was alright to consider an emerging issue at a dusty place like OECD with benign neglect. International organizations tend to shove the same paper around for years, with no tangible result. But then more recently, it totally misread the cues.

By 2002, a number of countries had signed up to the OECD standards, and more pressure developed as of 2004 at G20 levels and at the UN‘s meeting on cooperation on tax matters in 2008. At the same time even more pressure came from various groups, such as NGO’s. The ultimate warning should have been when in the US Senators Levin and Obama sponsored the Tax Haven Abuse Act. It put Luxembourg squarely on the list of abusive tax havens.

- As of September 2008, no one at the Luxembourg Government could be reached on the topic of the looming problem.
- Luxembourg chose not to attend the November OECD meeting in Paris.
- Luxembourg was still pursuing the vain defense of its banking secret until April this year. It had limited temporary success with a coalition of 3 European tax havens, with written commitments of OECD and EU that it would not be on any tax haven list. These commitments were broken within weeks. All these were good efforts for a not so good and already lost cause.
- Then Luxembourg got dragged into a public war of words that exposed the unfolding drama even more and left bruised reputations and egos on both sides of the dispute. It also left a number of European plans and ambitions in jeopardy.

Luxembourg has really arrived at the fork in the road. Good advice from someone who knows, Yogi Berra: "When you come to a fork in the road....Take it". It is important to let no one guess that the next agreement will be with Disneyland, a sarcastic assumption that there they go again, trying to fool OECD. It’s the other side of the fork in the road that goes into the right direction.

Banking secrecy is dead, if not in the eyes of Luxembourg officials, then in the eyes of the banking clients. What remains should be called “privacy” as it is for medical records. Or maybe “confidentiality” if it is not yet a dirty word.

Check Out My Other Blogs

Linked to this blog are my two other blogs:

- Peckvillchen.blogspot.com, in French and Luxembourgish, expresses opinion and also makes fun of the human comedy
- Feierwon.blogspot.com, mostly in French expresses opinion and discusses past and current events.

Today I posted on peckvillchen.blogspot.com: Luxembourg, Liechtenstein, Même Combat! (French)

Memorial Day 2009

“Boys don’t cry,” my aunt Naomi would say. So when I had to, I used some concealing strategies. That was a long time ago. But I knew Naomi would pop up, the moment I said:”Dear Day.” I had arrived in Wilkes-Barre the day before Memorial Day 1992, to honor the memory of Sgt Day G. Turner, who fell during WW II in Luxembourg. At my hotel I had rehearsed my speech for the following morning, and I had choked up every time, exactly there, when I addressed him with his first name “Dear Day.” I took a deep breath…..
Aunt Naomi and my childhood had invaded my mind. There was no television in those days. Neighbors would spend evenings together, under starry skies during summer, at the fireplace in winter. There would be my mother Marie, my father Nicolas, my five sisters Naomi, Cecile-Liliane, Lucie, Irene and Nicole. There would be my cousins Josephine and Leo. And our neighbor Nicolas, his son Nicolas, his grand-son Nicolas, our other neighbor Nicolas and his neighbor Nicolas. How come my name was not Nicolas? My original birth certificate has a stamp “Deutsches Reich” on it, together with an eagle and a swastika. My name Egide was changed by court order into its Latin form “Aegidius” to sound more German. My sisters’ names were suspiciously too French to translate and were changed into Erika, Monika and so on. My father was an outspoken anti Nazi. He had defeated a German attempt to enlist our town’s cultural society into the German SA. Then he went into hiding. My oldest sibling, Jean-Pierre, who became Hans Peter, had refused to join the Hitler Youth. At age 17, he was kicked out of high school and was drafted and sent to the Russian front. A cousin who had deserted, was dragged through town and shot. My sister Naomi (then Monika), got her marching order to join a Krupp ammunition factory in Essen as a slave laborer in the RAD, the forced labor department.

On September 10, 1944, while the family was fearing deportation for its anti-German leanings, a light aviation plane with a white star on a blue field on its wings flew over. Of course at an age of 7 months, I didn’t realize that I had chosen miserable times to be in this world. But later, during those long evenings, I heard the stories a hundred times. I was able to finish the adults’ sentences. There were all of a sudden GI’s around, all for sure much taller than 6 feet. They carried rifles, chewing gum, chocolate and a dictionary. They had medications. My mother’s sore throat went away and never came back.

Then all of a sudden the battle of the Bulge broke loose. A whole squad was in and around our house. “We take the boy,” my first baby sitters ever would say, while my mother tried to improve on the few combat rations. I know she also would bake pancakes. There was Kelly, who had written “Kelly loves Nelly” on a pre-war 5 Francs note. There was Fritz who had organized an impromptu patrol, because he had heard suspicious noises. When the patrol came back, they had identified the noises as not really coming from Germans, but from squealing pigs at a neighboring farm. That was such a relief: confusing Germans with pigs in those times was the most hilarious possible thing to happen. Kelly was killed in action two weeks later. Those old stories rushed through my head, but this now was Wilkes Barre, PA, and I was the Consul General of Luxembourg and I had to deliver a speech and choked up.

So I tried to get past the critical “Dear Day.” … The silence seemed endless. I was trapped in an unmanly situation. I couldn’t hide. A TV camera was whirring. In the front row, Sgt Day’s five sisters, were almost silently sobbing, when I said “Dear Day”. There was the Governor, the Mayor, the veterans. I had to say something, fill the silence: “I’m sorry, it is…a little overwhelming” When I got to the facts, that helped. “Dear Day: I know now that in the early December days of 1944, up there in the small Ardennes village of Dahl you commanded your 9-man squad. It turned out to become a critical mission. You were effectively going to defeat a German force so overwhelming in numbers and weaponry that the outcome was a miracle. The enemy was supported by artillery, mortar, and rocket fire. You had to withdraw into a nearby house, but you were determined to defend it to the last man. After hours of fighting, 5 of your men were wounded and 1 was killed. You would not give up, even boldly flinging a can of flaming oil at the first wave of attackers. They dispersed, they got into the house and you fought them room to room in some fierce hand-to-hand encounters. You hurled hand grenade for hand grenade, bayoneted 2 who rushed a doorway and you fought on with the enemy's weapons when your own ammunition was expended. The savage fight raged for 4 hours. Finally, when only 3 of your men were left unwounded, the enemy surrendered. Twenty-five prisoners were taken, 11 enemy dead and a great number of wounded were counted.
Sgt. Turner, Sir:
Your heroic leadership, determination and courage freed me when I was a baby. You earned the Congressional Medal of Honor, but I never even could thank you. I’m frustrated and inconsolable that one month later the enemy took you away from us.

Now, 17 years after honoring you in Wilkes Barre, dear Day, I just want to follow up on that speech. I wanted to tell you that things are fine. Certainly better than the prospects I had the year I was born. But then you came along and made the ultimate sacrifice for us. As you may know, I’m now a grandfather of three little Americans. I’ll tell them about you. And one day, when they are old enough, I’ll take them to the American Military Cemetery in Luxembourg. We’ll walk down the alley from General Patton’s grave, among the sea of 5,000 crosses and David’s Stars. Then we turn left at Plot E, Row 10, Grave 72 that says: Day G. Turner, SSGT 319 INF 80 DIV, Pennsylvania Feb 8 1945, Medal of Honor. You’ll recognize us: Morganne, Emilie and Alexander will carry Forget-Me-Nots.

Source picture: http://www.findagrave.com/cgi-bin/fg.cgi?page=mr&GRid=9329336&MRid=46577443&

Luxembourg: Peace Broke Out

It is hard to believe, that only days after the world held its breath, because Luxembourg was drumming the tam-tam with Swiss and Austrians, and shouting “Delaware, Delaware” dancing around the sleeping tiger that the tiger would just yawn and push a paper across the table, saying: “sign here!”

Teddy Roosevelt is quoted as saying:”Speak softly, but carry a big stick.” Some people have not learned the lesson correctly and went around yelling, but had no stick at all. As a consequence, the Luxembourg Minister of Finance had quite logically to go to Canossa, in this case to the US Embassy in Luxembourg and sign the paper that was shoved over to him across the table by the US Ambassador. After fierce “negotiations” probably about the color of the ink, black or blue, there was a sigh of relief on the US side, when it was finally done. After having been placed under the ban, the Luxembourg Minister of Finance, Luc Frieden, finally had performed the required penitential ritual. Peace has now broken out.

I’m not sure about the protocol in force here. Why would a member of a sovereign Government go to an Embassy to meet an Ambassador? I concluded that if Canossa doesn’t come to you, you have to go to Canossa.
But what are those gloating comments about avoiding a generalized information exchange? Each and every bank in Luxembourg has committed to the”Qualified Intermediary” exceptions already 8 years ago. So technically it is true that in 2009 generalized information exchange was avoided. The question wasn’t on the table anymore.

Usually promises only commit the believers. The good news is that Luxembourg has kept its promise to engage on a path to comply with OECD standards. But there remains the danger that Luxembourg’s chivalry in this case will not be sufficient.

1. Some agreements live the lifespan of a rose: only a moment in time. Proof is the European Union’s commitment to keep all its members off the OECD’s lists. Several member states were duped into believing that.

2. There is more to come. Under the push of various interest groups and mostly NGOs, other aspects of the haven nature will be brought to the forefront, such as judicial havens, corruption, international transfer pricing, money laundering, extortion, piracy. Each of those controversies carry the potential of international finger pointing, of redefining existing standards and agreements and promote new regulations and compliance requirements. It is now the time to do a thorough review of Luxembourg's future exposures. For sure there are some serious shortcomings that will be highlighted with ongoing examples and personal experiences on this blog.