The tiny Principality of Lichtenstein located deep in the heart of Western Europe is considered an uncooperative offshore tax haven by the Organisation for Economic Co-operation and Development – and now that reports abound about Lichtenstein bank data allegedly being sold to the UK and German tax authorities, could it just be that the jurisdiction has suddenly become unattractive too?
Until recently Lichtenstein was considered one of the most private and secure offshore tax havens in the world with significant penalties certainly incurred by anyone who dared break the location’s secrecy laws. Now it seems that external pressure from the OECD as well as an internal violation of the fundamental laws protecting the security of the Principality’s ‘customers’ could be putting more pressure on Lichtenstein than it can bear.
The reason why Lichtenstein is considered to be an uncooperative tax haven by the OECD is the exact same reason why it was attractive to many of those choosing to use banking, investment, trust and company formation services within the offshore tax haven. Basically the level of extreme and complete privacy afforded those who used the jurisdiction to the exclusion of even international tax authorities made it attractive to those seeking to hide their affairs effectively, at the same time as making it a thorn in the side of those attempting to stamp out cross border tax evasion.
The European Union has put pressure on Lichtenstein to sign up to the EU Savings Tax Directive, the OECD has put pressure on the jurisdiction to provide more transparency, and all attempts to get the authorities in the Principality to move have failed. And so the like of the UK and German tax authorities have seemingly given up waiting, if media reports are to be believed, and they have grabbed an opportunity when it was afforded them recently to buy Lichtenstein bank data relating to the nations’ citizens.
According to the Sovereign Group’s website, HMRC have paid an estimated GBP 100,000 to an informant with information about British citizens with bank accounts in Lichtenstein, and German authorities have allegedly paid a substantially larger sum for data pertaining to around 1,000 German nationals believed to be attempting tax evasion through the use of Lichtenstein as an offshore tax haven.
The news has caused uproar in Lichtenstein who are not taking the attack on their privacy laws lying down. They have accused Germany of ‘defying the rule of law’ for example, and it is expected that Lichtenstein will root out the source of the data leak and punish them if at all possible.