Luxembourg signed a new tax cooperation agreement with France yesterday that weakens its banking secrecy, one of over a dozen such deals it intends to reach this year to avoid being branded a tax haven, Reuters reported.

Luxembourg Budget Minister Luc Frieden was quoted by the news agency as saying that he hoped the Grand Duchy would have signed 15 double-taxation deals by the end of 2009 that meet the Organisation for Economic Cooperation and Development’s standards on information exchange.

Luxembourg must ink at least 12 such agreements to be removed from a so-called "grey list" compiled by the OECD in its drive against cross-border tax evasion.

OECD member states – leading industrial and developing economies – have been trying to put pressure on offshore financial jurisdictions as they complain such financial centres draw away much-needed tax revenues. In their defence, these jurisdictions argue that their standards of corporate governance and financial reporting are often as high, if not higher, than those of onshore locations. Some commentators, such as the Cato Institute, a US-based think tank, say tax havens encourage governments to keep taxes lower than would otherwise be the case.

The Group of 20 industrial and emerging economies, meeting at a summit in London, pledged in April to crack down on jurisdictions that fail to cooperate to combat cross-border tax evasion. Luxembourg signed agreements with the US, Bahrain and the Netherlands in May.