Liechtenstein eases banking secrecy rules

By Mathieu Robbins

Principality agrees to swap data with other countries to fight tax fraud and evasion

March 13, 2009

The tiny principality of Liechtenstein yesterday bowed to international pressure for more disclosure as it agreed to ease its strict bank secrecy by committing to international tax and data standards, in a signal that remaining tax havens are set to open up. The move, which was followed later in the day by a similar decision from Andorra, could also help ramp up the pressure on countries such as Switzerland, which has so far stood by its much-vaunted banking secrecy, to follow suit.

"With this declaration we want to make clear that bank-client confidentiality in future cannot be misused to facilitate tax crime," Liechtenstein's Prime Minister, Otmar Hasler, said.

The change in stance comes as finance ministers from the G20 nations prepare to meet in London from Friday in preparation for a full summit next month. Tax havens are expected to be discussed as governments do everything they can to maximise tax revenues hit hard by the economic downturn.

Liechtenstein, with a population of only about 35,000, has faced repeated calls to open up from quarters including the Organisation for Economic Co-Operation and Development (OECD).

The country has agreed to bilateral co-operation with other governments on tax fraud and tax evasion inquiries.

"The acceptance by Liechtenstein of OECD rules on transparency and tax cooperation certainly comes as good news for governments across the world looking to boost tax revenues," Ronnie Ludwig, a partner at the accountancy firm Saffery Champness, said.

The British government welcomed the Liechtenstein move, but added that more is necessary to grant access to all records pertaining to British citizens.

"Whilst today's commitment is to be welcomed, we need to see a quick application of the OECD standards on transparency, including to previous years, " Dave Hartnett, the HMRC Permanent Secretary for Tax, said.

A 2008 report by the OECD lists Andorra, Austria, Luxembourg, Liechtenstein and others as countries with excessive bank secrecy rules. More than £8trillion may be hidden in such havens.

Liechtenstein's neighbour Switzerland is also under pressure from US tax authorities that are pushing UBS to reveal the names of 52,000 US citizens with accounts there. But Credit Suisse and UBS's home country has so far stood fast in its stance on banking secrecy, leaving questions on whether it will be as easy to convince as its smaller neighbours.