Liechtenstein Crackdown "An Earthquake for European Private Banking"

Christopher Owen

3 March 2008

Germany is to call for the European Union to clamp down on the continent’s last tax havens in the wake of its massive investigation into tax evasion in Liechtenstein. German finance minister Peer Steinbrück will use tomorrow's meeting of Ecofin, the council of EU finance ministers, to propose tougher EU rules that would force Liechtenstein, Monaco, Andorra and Switzerland to co-operate fully with tax authorities in neighbouring countries. The German ministry’s draft proposal, reported by the Financial Times, includes: - An extension of the scope of the directive to cover not just interest payments on cash savings but all forms of returns on financial assets, including dividend payments and capital gains. - Making it applicable to legal entities, targeting German taxpayers who have parked their money in trusts in Liechtenstein and elsewhere in order to circumvent the rules. - Creating a duty for countries with strict bank secrecy rules to transfer information about the identity of bank account holders. The German government said it wants to secure backing for new regulations against tax havens, which it estimates are costing public coffers at €30 billion a year. Meanwhile UK Chancellor Alistair Darling is to step up hostilities against Britain’s super-rich by pressing for sanctions against Monaco, the Mediterranean tax haven, said The Sunday Times. He is to propose to Ecofin that there should be a levy on any money transferred to a Monaco account from anywhere in Europe. Precise policies will be discussed the following week at a meeting of Europe’s tax authorities in Berlin. “So far the attention has been on Liechtenstein, but Monaco is the goldmine,” a UK official told the Sunday Times. “Germany has got the bit between its teeth now and Monaco is where they want to go next – and we’re right with them.” Under Prince Albert II, Monaco has stuck to its zero income tax rate and refusal to share data with the world’s tax authorities. The principality has about 8,000 citizens, plus an expatriate community of at least 25,000. A spokeswoman for Laszlo Kovacs, the EU taxation commissioner, said at the weekend: “We are ready to cooperate. Nobody can solve this bilaterally." Key to the commission strategy will be tightening loopholes left by the 2005 EU Savings Tax directive requiring member states automatically to share information with each other on bank customers. Austria, Luxembourg and Belgium refused to give up their right to banking secrecy and the same exemption exists for Liechtenstein, Monaco, Andorra, Switzerland and San Marino. EU officials now hope there will be enough political pressure to push this entire bloc of countries towards sharing their data. Brussels has also set its sights on tax havens in Hong Kong, Singapore and Macau. Daniel Truchi, the global head of Société Générale’s private banking business, told the FT that Singapore could be the main beneficiary from the Liechtenstein probe because its bank secrecy and trust laws governing inheritance are among the tightest in the world. He said events in Liechtenstein are “like an earthquake for European private banking” because “it undermines client confidence”. The Spanish authorities are investigating about 100 people suspected to be involved in the growing Liechtenstein tax evasion scandal, according to El Pais newspaper. Quoting investigators, the newspaper said the names of Spaniards who had taken part in the fraud had been handed over by the German government which paid an informer for a list of people using the tiny principality to hide their wealth. The US, UK, Australia, Italy, France, Sweden, Canada, New Zealand and Greece have all said they are hunting taxpayers hiding their money in the tiny Alpine state.