Liechtenstein Commits To OECD Standards On Tax Matters

by Ulrika Lomas, Tax-News.com, Brussels

16 March 2009

The government of Liechtenstein announced on March 12 that it will commit to the Organisation of Economic Cooperation and Development's (OECD) standard on exchange of information for tax purposes, and stands ready to enter into bilateral tax agreements with individual states.

Under immense pressure from neighbouring Germany to dispense with banking secrecy laws following last year's highly publicized tax scandals, and with the Obama administration in the US demonstrating an equal level of hostility towards what it considers to be offshore 'secrecy' jurisdictions, Prime Minister Otmar Hasler said that the jurisdiction has become "aware of [its] responsibility as part of a globally integrated economic area."

"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 centre at the same time," Hasler announced.

However, Liechtenstein, one of only three jurisdictions to remain on the OECD's original 'blacklist' stemming from the first offshore crackdown by onshore governments a decade ago, has no plans to discard banking secrecy just yet and, with its declaration, is attempting to "ensure legal certainty and conformity" while at the same time "preserving privacy and bank client confidentiality."

"Our bank secrecy has always served to ensure the legitimate protection of the privacy of the citizen, which we will continue to retain. With this declaration, however, we want to make clear that bank client confidentiality in future cannot be misused to facilitate tax crime," said Hasler.

Dr. Klaus Tschütscher, who is due to succeed Hasler as Prime MInister at the end of March, believes that the policy will help to enhance the jurisdiction's reputation with onshore governments and at the same time attract more legitimate business to its financial centre.

"With the new agreements, the partner state concerned will receive more efficient tax application with respect to foreign assets, the clients of the Liechtenstein financial centre will receive a sustainable legal framework for meeting their tax obligations, and our financial centre will enhance its attractiveness and reputation for tax-compliant clients," he said.

However, despite its commitments to open up - Liechtenstein has already signed a Tax and Information Exchange Agreement with the US and concluded an anti-fraud agreement with the European Union - for its foreign critics, banking secrecy is likely to be non-negotiable.

Nonetheless, Prince Alois, Liechtenstein's head of state, is convinced that his government is sending out all the right signals.

"We are currently experiencing a fundamental and rapid change at the global level in the direction of stronger cross-border cooperation and international regulation," he said. "With today's declaration, the Liechtenstein government is sending a signal that it is participating actively in the regulatory dialogue of financial centres without giving up Liechtenstein's identity or the advantages of a reliable and well-regulated small state. I am convinced that this will help us strengthen the trust of our clients in our financial centre".

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