Plan to dilute bank secrecy prompts brief Austrian MP revolt

VIENNA (Reuters) - A flap over reform plans that would give the Austrian taxman more power to snoop into the accounts of suspected cheats opened a rift among conservative lawmakers before party discipline was restored on Friday.

The brief revolt by People's Party (OVP) MPs from Styria province had underscored sensitivities about banking secrecy in Austria and threatened to hold up a 5 billion euro (3.5 billion pounds) tax relief package due to take effect next year.

The governing Social Democrats (SPO) and junior partner OVP agreed in March after months of talks to cut income tax rates for nearly all except those earning more than 1 million euros a year as a way to boost the stalled economy.

The plan calls for raising nearly 2 billion euros in revenue by fighting tax fraud -- in part by requiring shops to enter all transactions into cash registers and give receipts -- and raises VAT rates on some items.

The Styrians were upset over provisions that dilute banking secrecy by giving more powers to tax inspectors, who could look into bank accounts without getting court approval as now.

"This is such a sensitive intervention in everyone's basic rights and privacy that you cannot do this without a judge's order, in my view," MP Werner Amon told ORF radio.

But Styrian OVP party chief Hermann Schuetzenhoefer later rowed back, saying the matter could get ironed out in the final version of the legislation. "Styrian deputies will all vote in favour," he told Austrian state broadcaster ORF.

National OVP leader Reinhold Mitterlehner said the Styrians had raised "absolutely fair and factual objections" that could be cleared up before a vote in parliament, where a two-thirds majority is needed because the law amends the constitution.

The government coalition is relying on the opposition Greens party to get the votes it needs. The Greens had said talks on the package were on hold until the OVP closed ranks.

Should the Greens go along, the SPO and OVP would have 123 votes in parliament, one more than needed.

When Austria agreed to share information with other EU members about citizens' foreign bank accounts, politicians took pains to assure the public that Austrians' domestic bank records would stay safe from prying eyes. But the current crackdown on fraud has changed the equation and sparked a popular outcry.

(Reporting by Michael Shields; Editing by Mark Heinrich)