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German Finance Minister Threatens Liechtenstein With Sanctions

by Ulrika-Lomas,, Brussels

06 November 2008

German Finance Minister Peer Steinbrück is threatening tax havens such as Liechtenstein with national sanctions, and urging the European Union to toughen its stance. Liechtenstein’s Prime Minister Otmar Hasler has reacted angrily to the criticisms.

In the on-going struggle to combat cross-border tax evasion, Germany’s Finance Minister has issued a clear ultimatum: if progress can not be made towards a European level of co-operation, then other means of legal attack will be launched, through either tax or customs laws or via financial regulations.

Steinbrück’s announcements follow talks at a meeting in Brussels on Tuesday with European counterparts.

Although the precise details of possible action have not been disclosed, the Finance Minister has made clear his intolerance of what he considers to be criminal activities undertaken by many individuals, deliberately seeking to evade German taxes.

Defending Liechtenstein’s position, Prime Minister Otmar Hasler vehemently rejected the accusations, emphasising that Liechtenstein was currently in constructive negotiations with the European Union (EU). Indeed, Hasler confirmed his intention to conclude double tax agreements with EU states, whilst emphasising that, in return for co-operation, the interests of Liechtenstein as a business location be maintained.

During the meeting, EU Finance Ministers discussed details of a planned anti-fraud agreement, which is currently being negotiated between the EU Commission and Liechtenstein. Nevertheless, Steinbrück denounced the moves, referring to the proposals as "totally inadequate". Austrian Finance Minister and Vice Chancellor Wilhelm Molterer indicated, however, that Austria would ratify the agreement in its current state.

Germany is pressing for Liechtenstein to comply with exchange of information standards. However, given that no unity on cross-border interest taxation within the EU exists, this is proving difficult. Austria, Luxembourg and Belgium, for example, do not currently provide information on interest income earned by EU savers to their home authorities under the European Savings Tax Directive, opting to levy an anonymous withholding tax instead. Third countries, including Switzerland and Liechtenstein, apply the same principle.

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