Pressure Mounts on Liechtenstein Tax Haven

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

That brings to at least 10 the number of nations eitherinvestigating or demanding that the principality overhaul the secrecycode that has lured thousands of wealthy investors and earned it a spoton an international blacklist of tax havens.

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

Germany, Europe’s largest country, has led the charge against thepostage-stamp-sized Liechtenstein and threatened to spread the battleagainst Switzerland, Luxembourg and Austria as well, as all claim someform of banking secrecy.

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

"In the light of recent developments involving Liechtenstein bankaccounts, there needs to be a significant move towards fullimplementation of OECD standards on transparency and effective exchangeof information in tax matters," Hartnett said.

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

Liechtenstein, a country of 35,000 inhabitants sandwiched betweenAustria and Switzerland, was thrust into the public light last weekafter Germany arrested a high-profile business leader in connectionwith alleged tax evasion using a Liechtenstein account.

Since then, calls have mounted on a daily basis, with France onTuesday saying it, too, was examining information on Liechtensteinaccounts.

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

A spokeswoman for the prinicpality of Liechtenstein declined to comment.

PUBLICITY DRAGNET

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

So far, the focus of the probe has been on LGT, a bank owned byLiechtenstein’s billionaire royal family. Germany has said it paid aninformant for bank details of suspected tax evaders. LGT has said onlythat secret client information was stolen.

Fears that the dragnet could snare Switzerland, the world’s largestrepository for international investments, deepened with stock in oneSwiss 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 asVontobel said it had no contact with German tax investigators and thatno client data from its Liechtenstein Treuhand AG unit had been stolenor abused.

Prosecutors in Germany have been investigating tax evasion scamsmainly involving the misuse of so-called foundations or trusts, whichdisguise the real owner of the investments.

Prosecutors said on Tuesday that the trusts they were probing heldfar 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’sbest-known business figures — Deutsche Post Chief Executive KlausZumwinkel. He was taken away from his home by investigators earlierthis month, in a dramatic scene televised throughout Germany.

(Additional reporting by Matthias Inverardi in Duesseldorf, JohnO’Donnell in Frankfurt and Albert Schmieder in Zurich; editing byElaine Hardcastle)