Liechtenstein is betting its offer to automatically share tax data on banking clients will end the principality’s decades-long reputation as a tax haven, a top bank official said.
Simon Tribelhorn, director of the Liechtenstein Bankers Association, said the announcement in November to lock in automatic-exchange agreements with five European nations and sign a tax treaty with the U.S. are “decisive” steps in moving away from the country’s tax-haven past. Still, it may take longer for Liechtenstein to shake off its reputation.
“I don’t think this image has completely disappeared, but there’s consensus that we’re no longer a tax haven,” Tribelhorn said in an interview in Berlin on June 25. “Reputation is a long-term project and can’t be resolved in a day. Words have to be followed by actions.”
A global crackdown on offshore tax havens following the financial crisis and a 2008 wrangle with Germany over stolen bank data have forced the principality to come clean over its tax policies. Liechtenstein, a nation of 36,000 people wedged in the Alps between Switzerland and Austria, has labored to shed its status as a destination for billionaires seeking to stash undeclared fortunes in favor of investors opting for stability.
In November, Liechtenstein signed onto an Organization for Economic Cooperation and Develop standard, pledging to clinch bilateral treaties for automatic exchange of bank data. It will first seek agreements with Germany, France, the U.K., Italy and Spain.
Last month, the country signed the Foreign Account Tax Compliance Act with the U.S. This requires banks outside the U.S. to share data on accounts held by U.S. taxpayers or face a withholding tax of as much as 30 percent.
OECD Secretary General Angel Gurria lauded Liechtenstein last year for its “unambiguous new commitment” to transparency.
“Liechtenstein has taken a very significant step today towards full transparency by endorsing the new standard on automatic exchanging of information,” Gurria said in a statement on Nov. 14 after the automatic-exchange announcement.
Tribelhorn said Liechtenstein foresees an 18-month timetable for completing automatic exchange accords following the signing of FATCA, meaning such pacts could be completed with nations such as Germany as early as the end of next year.
“It’s conceivable,” Tribelhorn said, asked about a possible agreement with Germany by the end of 2015. “We’ve tried to do our homework over the past two years, but looking ahead there is more to do in terms of the implementation.”
For Liechtenstein, the compliance is a contrast with an era when foreigners parked wealth in foundations and trusts beyond the purview of tax authorities.
In 2008, Liechtenstein’s Crown Prince Alois called a German tax investigation an “attack” on the principality following revelations that German agents had purchased a disk with stolen bank client data. A year later, Liechtenstein agreed to scrap bank secrecy and sign onto OECD tax standards.
Tribelhorn said there has been an outflow of “old money,” though new investors had also opened accounts. He declined to speculate where the old money had gone.
“Wherever the money goes, the rules of the game will be the same everywhere,” Tribelhorn said. “The OECD standards will come, then there will be no point in moving money out.”