Liechtenstein Willing To Cooperate On Tax Matters

by Ulrika Lomas, Tax-News.com, Brussels

04 September 2008

With its reputation tarnished by the German tax scandal that broke earlier this year, Liechtenstein's Prince Alois has announced the Alpine jurisdiction's willingness to cooperate with other countries in tax matters, although banking secrecy is to remain non-negotiable.

In a National Day speech which naturally focused heavily on the unwanted global attention which was heaped on Liechtenstein after it was accused of aiding and abetting citizens of Germany, the US and the UK, among other nations, of evading taxes, Prince Alois acknowledged that time has come for Liechtenstein to move more "forcefully" in the direction of cooperation.

Liechtenstein's system of mutual legal assistance and administrative assistance in tax matters should, as a result, be based on a new foundation, he said.

“We should offer all States comprehensive cooperation if they are willing to find sensible solutions with us for the client relationships we have built up, and if they are interested in fair and constructive cooperation for the future," Prince Alois remarked.

But, despite the ongoing campaign by onshore governments to crack open the veil of banking secrecy in jurisdictions such as Liechtenstein and Switzerland, Prince Alois affirmed that his government would continue to guarantee a high level of confidentiality to its banking clients.

“While many States are introducing the ‘transparent citizen’, we practice a culture of privacy that goes far beyond bank client secrecy in tax matters," he asserted.

This does not mean that Liechtenstein should remain isolated from the world, said Prince Alois, as he emphasised recent efforts to integrate the jurisdiction internationally, for example with its signing of the Schengen Agreement, its negotiation of an Anti-Fraud Agreement with the EU, and talks with the US over the continuation of the Qualified Intermediary 'QI' status. However, he pointed out that this strategy has been “substantially disrupted by the tax affair staged via the media.”

In an interview, Reigning Prince Hans-Adam II expressed a pragmatic view concerning the foreign pressure on the Liechtenstein financial centre: “Of course there will always be pressure. At the same time, we should not overestimate the threats, such as those by Germany.”

With respect to information exchange, the Reigning Prince believes that Liechtenstein is going about as far as Switzerland or Luxembourg in its negotiations. However, he maintained that Liechtenstein would always remain a refuge for the world's over-taxed.

“About 40 years ago, a German minister of finance threatened to invade Liechtenstein with the German fire brigade, should we continue to be a tax oasis. Attacks from the tax desert in the north have a long tradition – and still, we remain a tax oasis,” he remarked.

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