Pressure Mounts on Liechtenstein Tax Haven

By Reuters -  |  Posted 2008-02-26 Print this article Print

The heat is on Liechtenstein as more countries band together to combat the country's allowance of money from anywhere.

ZURICH (Reuters) - International pressure on the Alpine mini-state Liechtenstein mounted on Tuesday as more countries including France and Australia banded together to combat tax evasion.

That brings to at least 10 the number of nations either investigating or demanding that the principality overhaul the secrecy code that has lured thousands of wealthy investors and earned it a spot on an international blacklist of tax havens.

"Tax evasion is not a victimless crime. Honest citizens have to meet the cost of the tax that is evaded by a minority who are dishonest," said Dave Hartnett, acting chairman of the Australian revenue and customs authority, in a statement.

Germany, Europe's largest country, has led the charge against the postage-stamp-sized Liechtenstein and threatened to spread the battle against Switzerland, Luxembourg and Austria as well, as all claim some form of banking secrecy.

Liechtenstein is one of only three countries to earn a spot on the blacklist of countries that do not comply with information-sharing rules set by the Organization for Economic Cooperation and Development, or the OECD.

"In the light of recent developments involving Liechtenstein bank accounts, there needs to be a significant move towards full implementation of OECD standards on transparency and effective exchange of information in tax matters," Hartnett said.

The OECD has called upon Liechtenstein for years to shed more light on its murky financial sector, harboring 160 billion Swiss francs in client assets, and risks earning pariah status if it continues to stonewall international pleas.

Liechtenstein, a country of 35,000 inhabitants sandwiched between Austria and Switzerland, was thrust into the public light last week after Germany arrested a high-profile business leader in connection with alleged tax evasion using a Liechtenstein account.

Since then, calls have mounted on a daily basis, with France on Tuesday saying it, too, was examining information on Liechtenstein accounts.

Countries now openly acting in the tax affair include Australia, Canada, France, Italy, New Zealand, Sweden, the United Kingdom, the United States, Germany and the Netherlands.

A spokeswoman for the prinicpality of Liechtenstein declined to comment.


Separately, German prosecutors on Tuesday widened their investigation to a second bank in Liechtenstein. Investigators have searched about 150 properties in a trawl to prove that up to 1,000 millionaires hid there money in Liechtenstein.

So far, the focus of the probe has been on LGT, a bank owned by Liechtenstein's billionaire royal family. Germany has said it paid an informant for bank details of suspected tax evaders. LGT has said only that secret client information was stolen.

Fears that the dragnet could snare Switzerland, the world's largest repository for international investments, deepened with stock in one Swiss bank, Vontobel (VONN.S: Quote, Profile, Research), falling 10 percent at one point on Tuesday on fears it may be implicated.

Shares later trimmed losses but remained in negative territory as Vontobel said it had no contact with German tax investigators and that no client data from its Liechtenstein Treuhand AG unit had been stolen or abused.

Prosecutors in Germany have been investigating tax evasion scams mainly involving the misuse of so-called foundations or trusts, which disguise the real owner of the investments.

Prosecutors said on Tuesday that the trusts they were probing held far more than 200 million euros ($296.4 million) and that "immense" sums of tax revenue had been dodged.

The probe has already forced the resignation of one of Germany's best-known business figures -- Deutsche Post Chief Executive Klaus Zumwinkel. He was taken away from his home by investigators earlier this month, in a dramatic scene televised throughout Germany.

(Additional reporting by Matthias Inverardi in Duesseldorf, John O'Donnell in Frankfurt and Albert Schmieder in Zurich; editing by Elaine Hardcastle)


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