The three nations, worried they would be put on a tax haven blacklist, followed Liechtenstein and Andorra by bowing to international pressure to loosen banking secrecy rules to help other nations combat tax evasion.
The Swiss are notorious for their banking secrecy
Austria, Luxembourg and Switzerland have all announced that they will relax their rules on banking secrecy and work harder to help foreign governments trying to prosecute tax evaders.
A statement on the Swiss ministry of finance Web site said that Switzerland would "accept the standards of the Organization for Economic Cooperation and Development (OECD) on administrative assistance on tax matters."
"Banking secrecy does not protect tax crimes. International cooperation on taxes has become more important given the globalization of financial markets and in particular against the background of the financial crisis," Swiss President and Finance Minister Hans-Rudolf Merz told a news conference.
The Austrian Finance Minister Josef Proell told reporters that national banks would cooperate by exchanging tax data only in cases where an official probe has been initiated.
A similar announcement was made by the treasury and budget ministry in Luxembourg, which emphasized that data would only be shared after explicit proof was demonstrated.
Switzerland's finance minister said international cooperation is important
What is key about these decisions is that the three countries will not be changing their banking laws, but rather will simply be relaxing secrecy rules to help investigations into tax evasions.
The three nations had met earlier this week and had pledged to protect banking secrecy.
According to the dpa news agency, exchanges of information will take place on a case by case basis, and the step would preclude any so-called 'fishing expeditions', especially in Switzerland.
Following the announcement, the Swiss Bankers Association (SBA) said in a statement that it supported Bern's decision to offer better international cooperation on tax offences.
Liechtenstein will relax its banking secrecy rules as well
Austria, Switzerland and Luxembourg have been under enormous pressure to alter their banking secrecy rules as international demand to clamp down on tax havens increases in the run-up to the G20 group of the world's leading economic powers gets ready to meet in London on April 2.
The announcements be the three European nations comes just one day after the alpine states of Liechtenstein and Andorra that they would be initiating similar plans.
In a statement issued on Thursday, Liechtenstein said it has agreed to make its financial sector more transparent and work better on tax issues with other countries.