Having agreed to a tax deal with the UK recently, Liechtenstein is now co-operatingwith the US Treasury – mainly to avoid legal action against local banks – by agreeing to a so-called “group request” identifying their US clients.

Liechtenstein’s traditional secrecy started to unwind after data stolen from LGT (the bank owned by Liechtenstein’s royal family) was used in 2008 to convict Klaus Zumwinkel, the former CEO of Deutsche Post, of tax evasion Zumwinkel received a two-year suspended prison sentence plus a penalty of one million Euros (US$1.25 million).

Liechtensteinische Landesbank (LLB), the principality’s oldest bank, has told American clients that they are going to cooperate with a request from the US to reveal details of any accounts that have contained at least US$500,000 at any time since the beginning of 2004. This is the first such request since the Liechtenstein government amended the tax law in March of this year.

LLB is one of 11 financial firms, including Credit Suisse Group and Julius Baer Group, who are being investigated as part of a US probe of offshore tax evasion. The stakes for Swiss banks were raised after the Department of Justice indicted Wegelin & Co. on Feb. 2 for allegedly helping customers hide money from the Internal Revenue Service and just a week or so ago the Swiss government indicated that it too would co-operate by providing information on US citizens with bank accounts in Switzerland.

According to the letter LLB is sending to clients, the US group request also targeting lawyers, accountants, financial advisers, asset managers and those responsible for professional “asset protection,” who “conspired with a US taxpayer to commit US crimes or provided assistance”.

Under pressure from the US, Germany and France, Liechtenstein said in March 2009 that it would conform with tax standards set out by the Organization for Economic Cooperation and Development to avoid being blacklisted as a tax haven.

A Liechtenstein lawyer commented that “it’s only a question of time, say three to five years, until this type of group request becomes standard for future business. Liechtenstein is a small country that has a reputation for not cooperating in the field of tax and that’s something that has to change. We have to find new areas of business.

This is good news for jurisdictions such as the Isle of Man, Jersey and Guernsey who have for some years now suffered by being lumped together with non-compliant jurisdictions despite our being well regulated and co-operative. Indeed some would argue we are too co-operative, and certainly the level of regulation and anti-money laundering checks is far higher than you will find in the UK, the USA or most other countries.

The fact is that it is perfectly possible for individuals and businesses to operate internationally and to use no or low tax jurisdictions perfectly legally and openly so long as they are well advised. There are however far too many suppliers of off-the-shelf offshore companies that are at best likely to prove ineffectual or at worst put the purchaser in prison.

If you are interested in finding out more about international trading in a legal and tax efficient manner James Green & Co is a professional firm which provides independent advice to individuals and businesses engaged in or considering international trading particularly using offshore structures. They can be contacted at postmaster@jamesgreenandco.co.uk

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Category: International Taxation

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