The war being staged against opaque offshore banking havens by respectable non tax-evasive western states like Britain (and specifically Gordon Brown) appears to have claimed a victory. The tiny little Alpine principality of Liechtenstein, after more than a year of pressure from the likes of Germany and France to co-operate on tax evasion standards and having already negotiated a tax-information agreement with the US in December, has buckled on all fronts.
For as Liechtenstein declares on Thursday:
Liechtenstein commits to the OECD standard in tax matters and seeks to conclude bilateral tax agreements with individual States – Liechtenstein commits to the global OECD standard on transparency and information exchange in tax matters – The Government has begun discussions with interested States and Liechtenstein offers bilateral tax agreements for effective cooperation in cases of tax fraud and tax evasion and has already engaged in concrete talks with individual states – Liechtenstein wants to ensure legal certainty and conformity while at the same time preserving privacy and bank client confidentiality – Liechtenstein will fulfill its responsibility towards the clients of its financial center and meet the legitimate tax claims of its treaty partners.
The Liechtenstein Government accepts the OECD standards on transparency and information exchange in tax matters and supports the international measures against non-compliance with tax laws. Today, Thursday, the Government made public a Declaration to that effect in Vaduz. Liechtenstein offers interested States the negotiation of bilateral agreements for cooperation in cases of tax fraud and tax evasion. In this context, the Government also offers the possibility of agreements going beyond the OECD standard. Provided that there is a common understanding on how to regulate any former, ongoing and future tax compliance obligations may be met and on how clients of the financial center, if need be, can be provided with an orderly transition to tax legitimacy.
“We are aware of our responsibility as part of a globally integrated economic area. With today’s Declaration, we are making our contribution to a joint solution that will make an effective enforcement of foreign tax claims possible and takes account of the legitimate interests of the clients of our financial center at the same time,” said Prime Minister Otmar Hasler.
Of the utmost importance for the Government is that by entering into relevant agreements, Liechtenstein fulfils its responsibility towards the clients of the financial center and meets the legitimate tax claims of its treaty partners. For this purpose, the Government has engaged in detailed discussions with various States and multinational organisations over the last few months. The goal of said discussions has been not to jeopardize the enforcement of any foreign tax claims, while retaining the protection of privacy, including the bank client confidentiality, for the future.
“Our bank secrecy has always served to ensure the legitimate protection of the privacy of the citizen, which we will continue to retain. With this Declaration, however, we want to make clear that bank client confidentiality in future cannot be misused to facilitate tax crime,” said Prime Minister Otmar Hasler. The Government Declaration is supported by all important representatives of Liechtenstein politics and business.
Prime Minister-designate and current Deputy Prime Minister, Dr. Klaus Tschütscher, declares that the pro-active policies formulated in the Government Declaration are the only right path for Liechtenstein and, after assuming office as Prime Minister at the end of March, he pledges to implement it with concrete measures. “With the new agreements, the partner State concerned will receive more efficient tax application with respect to foreign assets, the clients of the Liechtenstein financial center will receive a sustainable legal framework for meeting their tax obligations, and our financial center will enhance its attractiveness and reputation for tax-compliant clients,” said Dr. Klaus Tschütscher.
During the current financial and economic crisis, the Liechtenstein financial center has proven to be very reliable, with a stable banking system that has so far done well without State support. The goal of the Government is to create a sustainable development perspective for the financial center. “We are currently experiencing a fundamental and rapid change at the global level in the direction of stronger cross-border cooperation and international regulation,” said H.S.H. Hereditary Prince Alois von und zu Liechtenstein.
“With today’s Declaration, the Liechtenstein Government is sending a signal that it is participating actively in the regulatory dialogue of financial centers without giving up Liechtenstein’s identity or the advantages of a reliable and well-regulated small State. I am convinced that this will help us strengthen the trust of our clients in our financial center.”
While the principality’s ‘declaration’ does emphasise the state will strive to maintain client privacy as best it can, it’s worth noting it still mostly focuses on a cracking down on tax fraud rather than evasion - which has always been deemed a lesser offence in Liechtenstein. Tax evasion will from now be a bilateral matter, with Liechtenstein promising that the partner state will receive more efficient tax application with respect to foreign assets.
Whether that somewhat vague specification will satisfy the likes of Gordon Brown and Germany on their tax-evasion clamp down remains to be seen.
The principality, of course, came under great duress on the matter of tax evasion about a year ago when Germany opened a probe of some 900 Liechtenstein account holders after acquiring confidential account data from a former employee of LGT group, the bank owned by the ruling family of Liechtenstein. The list included former Deutsche Post chief executive Klaus Zumwinkel. At the time Liechtenstein called the move an outright “attack” on the principality.
Related links:
Liechtenstein Accepts Global Standards in Fighting Tax Dodgers – Bloomberg
The massacre of relationships between rich foreigners and small Alpine principalities - Youtube