Spies, whistle-blowers and threats: tax haven ...

[conspiracy analyst]

Spies, whistle-blowers and threats: tax haven is called to account
Roger Boyes in Vaduz

The day that Toytown went to war, the traffic stopped. For more than a week Liechtenstein (population 35,000) and Germany (population 82 million) have been locked in an extraordinary row involving spies, bankers, a whistle-blower with a shady past, a furious prince – and tens of thousands of well-heeled but anonymous tax evaders. From Britain, from the United States, but, above all, from Germany.

This strange international flare-up is having its effects on the cramped streets of Vaduz, the capital of Liechtenstein. The Mercedes Sclass limos that usually convey wealthy Germans and their earnings to one of the safest tax havens in Europe have disappeared from public view. The German taxpayer is running scared.

“If you listen to people at home, in the office, in the pubs, it is clear that Liechtenstein is bubbling with rage, boiling over,” says Günther Fritz, editor of theLiechtensteiner Vaterland. “We can’t be treated like this.”

Germany provoked this angry response by using its secret service to buy four DVDs bursting with information about tax evaders or simply tax-saving investors who had put their money in Liechtenstein. According to the LGT banking group, out of the 1,400 individual names on the stolen list, 600 are resident in Germany. German tax authorities said yesterday that they had traced €200 million (£150 million) deposited by 100 wealthy tax-dodgers.
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British tax authorities are studying details of accounts held at the Liechtenstein LGT bank. America, Australia, France, Spain, Italy and Sweden are also trawling for information about their tax exiles.

The Germans paid €4.2 million for the DVDs and are using the information to spearhead a campaign against tax havens across Europe. Next in line is Prince Albert of Monaco, who is due in Berlin this week. Angela Merkel, the German Chancellor, is set to read him the riot act. Soon, German officials say, the Chancellor will be on her way to Switzerland to make her case there. German secret agents have information from a second bank, the Vaduz subsidiary of the Swiss private bank Vontobel, according to the Süd-deutsche Zeitungnewspaper yesterday.

Germany threatens to impose sanctions against Liechtenstein if it does not seal up its tax loopholes. The Liechtensteiners are stubborn. However, if Germany is going to continue to use espionage to end anonymous bank accounts in fellow European states, then it is going to threaten the very existence of the principality.

Liechtenstein, perched on a barren mountainside between Austria and Switzerland, used to be dirt poor, living off the vineyards that still tumble down through the middle of the capital. Big, colourful postage stamps were also part of its financial strategy.

That was about it until the father of the current ruler, Prince Hans-Adam, started to invite banks on to his mountain and construct a small, rocky, tax-free paradise. Drain away the customers from these banks and Liechtenstein becomes a failed state.

“We don’t have an intelligence service,” Gerlinde Manz-Christ, a senior official in the Liechtenstein Government, says. “In fact, we haven’t had an army since 1868. So we were taken completely by surprise by the action of the German agents. And you know what hurts Liechtenstein most is that we are actually changing fast – we sign the Schengen agreement on Thursday, which will have tax implications, we are negotiating the terms of a money-laundering agreement and, by the summer, we will have a new law on financial foundations.”

She emphasises that banking anonymity will stay: there is no alternative for Liechtenstein, however loudly the Germans complain.

The timing of the German move and its harsh tone baffle the locals. Germany seems to be shifting to the left and the grand coalition Government appears to believe that it can mobilise votes by playing on the German sense of envy. For the Liechtensteiners – and the neigh-bouring Swiss – it is plain that the German tax system is to blame.

http://www.timesonline.co.uk/tol/news/world/europe/article3441900.ece

[TonyGosling]

Companies such as Enron, Newscorp, Elan, Exxon, Northern & Shell Group, Portland Investment, Microsoft, General Motors and others have used tax havens to shave their tax bills. By plugging the leakage of tax revenues to tax havens, the UK government could raise up to £85 billion extra in tax revenues, large enough to fund schools, hospitals, pensions, public transport and social infrastructure.
Offshore tax havens stunt the economic/social potential of developing countries by enabling transnational companies to siphon off some US$50 billion a year in tax avoidance/evasion. Around one-third of the world’s Gross Domestic Product (GDP) at some stage passes through offshore tax havens. Around US$6 trillion of assets are estimated to be held in offshore tax havens, yet none are known for any advances in science, education, philosophy or human rights. The merely shuffle cash around to create financial instability, dodge taxes and cheat people.
Secrecy, poor regulation and inadequate law enforcement in offshore tax havens is a magnet for drug traffickers, money launderers and criminals. More than US$1.6 trillion a year is estimated to be laundered, mostly through tax havens that guarantee secrecy, ask no questions and rarely co-operate with international inquiries. The institutionalised corruption is destroying lives everywhere. Many of the offshore tax havens are British Crown territories and are promoted and defended by the UK government.
Tax havens, like Jersey, sit right on Britain’s doorstep. With a population of 87,000, the island is the home of some £400 billion of footloose capital. Jersey is effectively run by big business. It rents out its legislature to big business, which writes its own laws. Jersey has never had a general election in its entire history. It does not have the usual checks and balances, or separation of the legislative, executive and judicial functions. It has no written record of major parliamentary debates and adequate consumer protection laws. Anyone speaking out is clobbered and ostracised. Members of Jersey’s Parliament who dare to ask uncomfortable questions are threatened with indefinite suspensions.
People everywhere need to challenge the privileges of tax havens and the
companies that are hiding there.

http://www.taxjustice.net/cms/upload/pdf/AABA.pdf

[TonyGosling]

Consider the case of News Corporation, the corporate empire of Rupert Murdoch.
For the four years to 30th June 1998, it generated pre-tax profits of A$5.4 billion but paid tax of only A$325 million, an effective tax rate of only 6% (The Economist, 20 March 1999, pp. 83-84). A major reason for this is the use of offshore tax havens with artificially low taxes. The Murdoch empire operates from a web of some 800 subsidiaries, many registered in offshore tax havens, such as the Cayman Islands (UK Crown territory, area 100 sq. miles, population 36,000), Bermuda (UK Crown territory, 100 sq. miles, population 61,000), the Netherlands Antilles and the British Virgin Islands (UK Crown territory, population 12,000). These places ask no questions, promise secrecy and have no requirements for public filing of meaningful financial information.