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French and Germany spearheaded a fresh offensive against tax havens, slamming Switzerland and Luxembourg for banking secrecy laws and low taxes during a meeting of the Organisation for Economic Cooperation and Development (OECD) in Paris.

In particularly crushing terms, German Finance Minister Peer Steinbrueck singled out Switzerland for criticism, saying it had failed to fully cooperate on taxation issues and deserved to be on the new list. "Switzerland should be on the blacklist and not the green list" of countries that do cooperate, he said.

"Banking secrecy has its limits," France’s Budget Minister Eric Woerth added.

Three countries - Andorra, Liechtenstein and Monaco - are on the OECD blacklist for refusing to share any information on their finance sectors.

Talk, threats, and no action yet

The boycott of a number of countries raised questions over the possible clout that any decision could have. Switzerland, along with Luxembourg, decided to boycott the meeting. The absence of Jean-Claude Junker, head of the eurozone and prime minister of Luxembourg, highlighted the European Union’s lack of unity on the issue of tax havens.

“It doesn’t look very good because as head of the eurogroup and prime minister of Luxembourg, Jean-Claude Junker can speak in the name of European finance ministers, except when it is to speak of finance moral and secrecy of bank accounts,” says FRANCE 24’s business editor, Raphael Kahane, before adding “he’s the main absentee.”

But Junker on Tuesday urged his country to be prepared to debate its banking secrecy laws, under a reform of global financial institutions. "I cannot share the idea that the whole global financial system has to change but that nothing can move in Luxembourg," he told members of the national parliament.

Questioned about their commitment to putting words into action, politicians at the meeting timidly advanced measures they would be willing to take against fiscal paradises. “We have prepared certain sanctions such as more tax on income transferred to [fiscal paradises] and a ruthless fight against banking secrecy laws,” said Woerth at a press conference following the meeting.

But for the moment, no sanctions have been taken against tax havens. Countries will decide in Berlin in May or June 2009 what new countries will be included on their blacklist, Woerth said. Stephen Timms, Financial Secretary to the UK Treasury, hopes that words will be enough. “Territories will find that it is best not to be on the OECD blacklist for their commercial interest because there is a severe commercial downside to being on a blacklist,” he said.

The impact of the financial crisis

In the wake of the massive taxpayer bailouts in the United States and the European Union, politicians are eager to show they are getting tough on tax evasion. “The financial crisis has boosted calls to tighten the screw on the system,” says FRANCE 24’s Kahane. “These countries [fiscal paradises] play host to many unregulated hedge funds that were partly blamed for the crisis.”

During an interview with FRANCE 24, OECD head of tax policy division, Pascal Saint-Amans, explained that the countries gathered at Tuesday’s meeting could not take immediate action against hedge funds which might have offshore accounts because such dramatic action was not “technically” possible.

He added that “what was lacking until now was the political attention, the political momentum” to move forward. He recalls that the meeting was organized, not in the wake of the financial crisis, but in response to the scandal involving German accounts located in Lichtenstein in February 2008.

Transparency International France estimates that about 10 trillion dollars - four times France's gross domestic product - are stashed in secret offshore accounts away from the prying eyes of regulators or tax inspectors.