Liechtenstein Agrees to End Bank Secrecy on Tax Data

[R.A. Hettinga]

<http://online.wsj.com/article/SB124727784329626615.html#printMode>

The Wall Street Journal
		
EUROPE NEWS
JULY 11, 2009
Liechtenstein Agrees to End Bank Secrecy on Tax Data

By DAVID CRAWFORD

Liechtenstein initialed a deal with Germany to drop bank secrecy laws  
starting next year that until now have prevented cooperation in tax  
probes, one of the first concrete outcomes of promises that offshore  
tax havens across Europe made this year to open up their bank sectors.

Friday's agreement in Berlin was triggered by pressure ahead of  
April's meeting of Group of 20 nations, which had threatened to  
produce a blacklist of alleged tax havens for targeting with  
sanctions. Promises made by Lichtenstein and other offshore banking  
centers just ahead of the meeting caused G-20 leaders to back off, but  
the threat of sanctions remains if bilateral cooperation deals aren't  
reached.

A Liechtenstein government spokesman said the German accord follows a  
model recommended by the Organization for Economic Cooperation and  
Development, an intergovernment think tank based in Paris. Friday's  
pact still needs to be signed formally and ratified to take effect.

The pact doesn't allow German tax investigators to trawl Liechtenstein  
bank records searching for possible offenders, the spokesman said.  
That means banks in Liechtenstein will offer data on clients only in  
response to specific tax fraud investigations by foreign governments.

A spokeswoman for the German Finance Ministry said, "The initialing of  
the agreement confirms the success of our international effort to  
obtain cooperation in tax investigations based on OECD guidelines."

Liechtenstein and the U.S. signed a similar accord in December. Talks  
are under way for a tax-information agreement with the U.K.,  
Liechtenstein said, adding it hopes to reach an accord with the  
European Union as a whole that would overlap, but not replace, its  
German pact.

An accord with the EU would allow Liechtenstein to cooperate with tax  
investigations in 27 countries, Liechtenstein said. Germany is  
surrounded by smaller jurisdictions such as Liechtenstein, Luxembourg,  
Austria and above all Switzerland that offer tighter bank secrecy laws  
that are attractive to German citizens looking for ways to hide income  
from tax authorities in Berlin.