Andorra to Introduce Income Tax for the First Time


The tiny landlocked nation Andorra is poised to introduce a personal income tax for the first time, effectively putting an end to its status as a tax haven as it comes under increasing pressure from its European neighbours to clampdown on tax evasion.  

In a meeting with French President Francoise Hollande, head of the Andorran government Antoni Marti said he will introduce a bill before 30 June to establish some form of personal income tax.

While lacking details, Marti promised the plan would “progressively bring its tax system in line with international standards,” reported the Telegraph.

A tiny landlocked nation with borders abutting France and Spain, Andorra is one of a few micro-states in Europe that remain outside the European fold by not signing treaties on a range of policy areas, notably on tax.

The principality currently has no income tax applied to individuals, earning it a reputation as a tax haven, though it did introduce a modest corporate levy for the first time last year and a system of Value Added Tax from January 2013.

With a population of 84,000, it depends on its strict banking secrecy rules, tourism and duty-free trade to become a financial and commercial success.

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EU finance ministers have agreed to start talks with Andorra - along with Switzerland, Liechtenstein, Monaco, and San Marino - on swapping bank account information.

EU tax authorities already automatically exchange information for income such as employment, pensions and insurance but not for income such as dividends and capital gains.

“Bank secrecy is a relic of the past,” said Algirdas Semeta, the European Union’s senior official responsible for tax issues. “Soon we will see the death of bank secrecy around the world.”

Some the world’s most tight-lipped offshore havens — the Cayman Islands, Turks and Caicos Islands, and other British territories in the Caribbean — announced in May that they will begin to share bank account information, though they retain highly opaque corporate registration systems.

Tax evasion is estimated to cost the European Union as much as 1 trillion euros a year.

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