Liechtenstein shows its true colours – and they’re not pretty

August 12th, 2009

Associated press were one of the many agencies I spoke to yesterday (some of whom have given no credit for the data supplied – such is life). They have a story that in one incarnation is here:

Liechtenstein’s agreement to help Britain recover taxes on wealth hidden away in the tiny Alpine principality by U.K. taxpayers is only the latest sign that traditional tax havens are yielding to governments hungry for extra revenue during the economic crisis.

“The agreement signed today is a very significant development,” said Jeffrey Owens, tax policy director at the Organization for Economic Cooperation and Development. “It shows that the days of bank secrecy as a shield behind which evaders can hide is rapidly disappearing,” Owens said.

Yet some experts see a flaw in most of the deals signed so far.”The standard of proof that the inquiring country has to reach before it can submit an information request to a tax haven is so high, that they basically have to know all the information about which they’re asking,” said Richard Murphy, director of British-based policy consultants Tax Research LLP.

“It is almost impossible for tax inspectors to create an audit trail connecting me to that bank account, unless I’ve been stupid or they strike very lucky,” said Murphy.

He did – rather odd though that the simplified language used to explain how these things work – in which I played the role of abusive taxpayer – got into the article. But as they went on to note, I added:

Still, the accord between Liechtenstein and Britain breaks new ground.

Not so fast says Liechtenstein in response:

“The agreement is specific to the British tax system and can’t be used as a blueprint, but it could show the way for future accords of this kind,” said Max Hohenberg, spokesman for the Liechtenstein government.

Well, I anticipated that:

Murphy, who campaigns for greater tax transparency, isn’t convinced the Liechtenstein deal is enough. “We are making progress, but we’re a long way from seeing a solution yet,” he said. “Revenue services in several countries are already wising up to the fact that without some sort of active disclosure on the part of tax havens — such as by automatically reporting the real owners of accounts and companies to their governments — investigations will fail at the first hurdle. They know that behind the PR schmoozing there is a problem with this process.”

He said some way has to be found to make available “smoking gun” evidence tying an individual to an offshore account.

But as the article notes:

Getting tax havens to agree to actively give up the names of their foreign clients is a step too far, even for Liechtenstein.

“At no point will we automatically provide information to other countries,” said Hohenberg. “We’re trying to reach agreements that will block any moves toward automatic disclosure.”

So, as I said, we still have a long way to go.

And Liechtenstein still has a lot to learn about coming in from the cold.

But they will learn it, eventually. They won’t have any choice.

Written by Richard Murphy

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