EU leaders face tough talks at tax fraud summit

Leaders of recession-hit Europe take a fresh stab at fighting tax fraud and evasion worth a trillion euros a year at a summit Wednesday but seem unlikely to convince reluctant Austria and Luxembourg to sign on. With euro-scepticism gaining ground as European Union unemployment queues lengthen and growth slumps, there were hopes of the one-day summit producing an EU-wide crusade against tax evasion and agreement to make the bloc energy-sufficient. "In times of tight budgetary constraints and expenditure cuts, combating tax fraud and evasion is more than an issue of tax fairness," said EU summit chairman Herman Van Rompuy in his letter of invitation to the bloc's leaders. The fight for tax transparency "has become essential for the political and social acceptability of fiscal consolidation," he said. But at finance minister talks last week, Austria and Luxembourg refused to sign up to an EU-wide tax collection plan involving the sharing of bank records across borders. Luxembourg Prime Minister Jean-Claude Juncker has warned that a new deal "is not possible Wednesday in Brussels." Europe's leaders are to converge on the Belgian capital from 1000 GMT with the summit proper held over a late working lunch scheduled to end at 1500 GMT. "We are close to a solution" on tax, said an EU diplomat speaking on condition of anonymity Tuesday. "But there are still reservations from countries dependent on banking secrecy." Rather than sign up to the 2008 plan to share bank account information across borders, Austria and Luxembourg insisted that the EU executive, the European Commission, negotiate new transparency norms with banking havens Switzerland, Andorra, Monaco, Saint-Marin and Lichtenstein. But EU officials are adamant that the two issues -- an EU-wide tax deal and one between the 27-nation bloc and the five havens -- remain separate. "It's important that the two (Austria and Luxembourg) show signs of compromise at the summit to enable the EU to head into G8 talks in Ireland next month with a common position on tax evasion," an official said. Italian Prime Minister Enrico Letta meanwhile complained Tuesday of the "incredible hypocrisy on a European level" in the fight against tax fraud. "Many have raised the question of tax havens and I agree completely that more needs to be done (but) ... the problem is that there is incredible hypocrisy at a European level," Letta told members of parliament's upper house. The idea of cracking down on tax fraud "is not received well by some because of the loss of easy earnings," the premier said, without naming any particular country. Desperate to boost growth, leaders will also seek to agree a joint energy policy in the face of a US-led revolution in shale oil and gas that threatens to leave Europe behind. "Europe risks becoming the only continent to depend on imported energy," Van Rompuy warned last week. But a draft of the summit conclusions makes no direct mention of shale, referring only to European Commission plans to "assess a more systematic recourse to indigenous sources of energy with a view to their safe and sustainable exploitation." It also calls for more investment and development in energy.