Reply #2: Can't Wait 10 Years? Liechtenstein eases bank secrecy rules (follows Switzerland)

[Demeter]

http://www.ft.com/cms/s/0/b85d298a-0ed9-11de-ba10-0000779fd2ac.html



Liechtenstein agreed to relax its vaunted bank secrecy rules on Thursday and accept standards on international tax co-operation set by the Organisation for Economic Co-operation and Development.

The move came ahead of an announcement on Friday by Switzerland, which is expected to announce concessions on bank secrecy in response to mounting international pressure on financial centres that have the strictest forms of client confidentiality.

Liechtenstein said it would negotiate new rules with other countries to encourage wealthy foreigners holding undeclared accounts to come forward voluntarily. The first talks on the initiative, discussed at length with the OECD, are due on Friday with Germany and then the UK next month.

Monaco, which, like Liechtenstein and Andorra, was put on an OECD list of “un-cooperative tax havens” in 2000, said it was reviewing its position, but did not expect to reach a conclusion for several weeks. Andorra indicated it would move to repeal bank secrecy rules.

Liechtenstein will go not so far as to abolish bank secrecy. But the principality will co-operate more fully with foreign tax authorities and will end the confusing distinction, also retained by Switzerland, between tax evasion, a civil offence, and tax fraud, a crime.

Critics of Switzerland and Liechtenstein argue that the strict distinction has hampered foreign tax authorities’ attempts to gain information, as local authorities only co-operate on tax fraud.

Liechtenstein’s move comes days after Singapore said it would relax its bank secrecy rules, which are among the strictest in the world. Hong Kong announced plans to allow the exchange of tax information last month.

Restrictions on access to bank information for tax purposes remain in Austria, Luxembourg, and a number of offshore centres, including Panama. Luxembourg has said it would participate in talks on transparency, so long as they included other EU territories, such as the Channel Islands.

The separate bilateral accords Liechtenstein hopes to negotiate are seen as a longer-term solution for dealing with tax evasion. Specialist lawyers argue the problem is global, and attempts to crack down on one country will only prompt a flight of assets elsewhere.

Prince Alois, Liechtenstein’s hereditary ruler, said its “fresh approach” would be more productive for all concerned than threats of discovery. He argued Liechtenstein’s initiative could serve as a global template.

“We think we have come up with an approach that is much more attractive to all concerned. This is a chance to secure a really long-term solution,” he said.

He declined to say whether Liechtenstein would seek amnesties or just moderate fines for foreign clients of its banks who decided to come forward.

When news of Liechtenstein’s plan first seeped out last year, some countries indicated they would be unwilling to negotiate such settlements. But Prince Alois said the principality had received strong indications of interest, both from other states and intergovernmental organisations.