Liechtenstein No Longer ‘Whipping Boy’ on Taxes, Top Envoy Says
Nov. 28 (Bloomberg) — Liechtenstein is no longer the “whipping boy” of international watchdogs as it seeks to shed a reputation as a blacklisted tax haven and adopts global standards on data sharing, the country’s top diplomat said.
A month after the Alpine principality joined governments around the world in signing an agreement on automatic data exchange, Liechtenstein Foreign Minister Aurelia Frick said her nation of 37,000 is changing its business model.
“We don’t feel like the whipping boy in the corner,” Frick said in an interview in Berlin yesterday after meeting her counterparts from Germany, Austria and Switzerland. “We’re part of the discussion and are perceived as a reliable partner.”
Once viewed as a rogue state popular with millionaires seeking to hide wealth from tax authorities, the tiny monarchy wedged between Austria and Switzerland has won plaudits from the Organization for Economic Cooperation and Development and support from its banks for meeting global tax standards.
“I want to emphasize that we are very pleased that Liechtenstein is taking part” in the automatic exchange of tax data, German Chancellor Angela Merkel said at a news conference alongside Prime Minister Adrian Hasler in Berlin on Oct. 22.
Frick said the tax issue, which once dominated relations with Germany, didn’t come up in the day’s talks with German Foreign Minister Frank-Walter Steinmeier. In February 2008, Crown Prince Alois, who rules Liechtenstein as heir to the princely seat, called Germany’s tax investigation spurred by mining data on stolen CDs, an “attack” on his country.
Alpine Stability
Shifting away from its tradition of guarding banking secrecy, Liechtenstein last month joined a group of so-called early adopters of the OECD’s standard on automatic data sharing. That will prepare the country to take part in annual exchanges of information on account holders, including income from interest, dividends and other assets, starting in 2017.
Liechtenstein’s banking industry accounts for more than a quarter of the country’s $5.4 billion economy. Now, the principality needs to draw investment based on its stability rather than as a destination to stash wealth, said Frick, 39, who has been foreign minister since 2009.
“We underwent a huge change in thinking,” she said. “There was the old business earlier — you know that and we know that — and today we’re building on a very solid and to a certain extent transparent business model.”
Liechtenstein can offer stability with the Swiss franc as its currency, Frick said. The country’s diminutive size — less than a tenth the size of Washington D.C. — gives it the advantage of reacting more quickly to global events and winning consensus among its interest groups, the minister said.
Luxembourg Comparison
Frick dismissed comparisons with Luxembourg, which has been criticized for offering deals to global companies that whittle away their tax bills. Liechtenstein, with a finance sector geared toward private banking, has “different challenges and different structures.”
“One shouldn’t confuse these two countries,” Frick said.
Still, Liechtenstein has work to do to change its tax-haven reputation. The castle of the princely family, among Europe’s oldest noble lines, overlooks a patchwork of modern banking buildings from a cliffside perch in Vaduz, the capital.
“It’ll certainly take some time until we get there and that it’s recognized everywhere, but a great number have recognized that we’ve chosen this path,” Frick said.
To contact the reporter on this story: Patrick Donahue in Berlin at pdonahue1@bloomberg.net To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Tony Czuczka, Chad Thomas
