Liechtenstein has agreed to ease its strict bank secrecy law by committing to OECD standards on tax transparency and data exchange, a fresh sign that a global crackdown on tax evasion is forcing offshore centers to open up.
The tiny principality, a financial centre wedged between Switzerland and Austria, is seeking to be removed from a black list of tax havens and will now offer bilateral tax deals for cooperating in cases of tax fraud and tax evasion. It said it had already started concrete talks with individual states.
Coming on the heels of a landmark tax co-operation deal with the United States in December, the move by Liechtenstein was a fresh attempt to clean the country's image after a damaging data theft scandal that engulfed its largest bank LGT last year.
“Our bank secrecy has always served to ensure the legitimate protection of the privacy of the citizen, which we will continue to retain,” Prime Minister Otmar Hasler said in a statement.
“With this declaration, however, we want to make clear that bank client confidentiality in future cannot be misused to facilitate tax crime,” Hasler said.
The principality is also offering to sign agreements that go beyond the OECD standards provided that clients of its banks holding secret accounts can be allowed to bring their money on-shore and meet their tax obligations in an orderly manner.
Liechtenstein's new commitment comes just weeks before a meeting of the G20 nations on April 2 that is due to discuss the fight against tax havens among other matters and could add pressure on neighboring Switzerland, the world's largest offshore centre.
Liechtenstein, along with Andorra and Monaco, is still on a black list of uncooperative financial centers drafted by the Organisation for Economic Co-Operation and Development (OECD) and has been under pressure to relinquish its bank secrecy rules.
Bank LGT, which manages the assets of Prince Max von und zu Liechtenstein alongside bank clients' money, was last year at the centre of a data theft scandal, which saw Germany paying a former employee to access bank client information.
That scandal, exacerbated by the ongoing financial crisis and by pressure by German finance minister Peer Steinbrueck, has triggered billions of Swiss francs of outflows at LGT, prompting the country to rethink its role as a tax haven.
Europe's fourth-smallest country agreed in December to share information on tax evasion with the United States, the first step in a rehabilitation process keeping other offshore hubs on their toes and which may unnerve neighboring Switzerland.
Switzerland is under pressure from a US tax fraud investigation into services offered by UBS to its many wealthy American clients, to make more concessions.
The Swiss government has said it would consider concessions on banking secrecy and will discuss the topic at a meeting on Friday.
Liechtenstein, whose banks manage $165 billion of assets, is also already discussing more tax cooperation with the European Union.
Liechtenstein does not plan to move to automatic exchange of information. It will retain bank secrecy but be more co-operative with other tax authorities when requested.
“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,” Hasler said. (Reuters)