In the past 70 years Liechtenstein's tax policy was clear. There would never be a data exchange on taxation matters. This was a strict policy up to the year of 2000 at least and even then nobody would have dared to predict this policy would ever change. Liechtenstein was the country with the strictest tax and professional secrecy ever possible. But things changed dramatically the last nine years, especially this year, 2009.

The OECD initiative concerning tax havens and harmful tax competition, "Harmful Tax competition: an emerging global issue" of 1998 as well as the black-listing of Liechtenstein on a list of non cooperative tax havens in 2000 was a first link that the OECD was not happy with the policy of offshore centers and the policy of Liechtenstein, too.

The black-listing of Liechtenstein concerning money laundering by the FATF in the year 2000 led to joint incentives to get Liechtenstein off this list at least. This was reached half a year later by implementing a very strict due diligence act and a new authority, the so called FIU (financial intelligence unit). Since then the due diligence act was changed two times and the FMA, the financial market authority which has been implemented in 2005, had more personnel every year.

The fact, that in every business relation the beneficial owner is known usually to the trust office and the bank, is of course very interesting also for tax authorities. They would like to know if taxes of inhabitants of the respective countries have been paid and everything has been declared properly. Some of them are so interested that they even undertake illegal acts by supporting criminals who steal these data from their rightful owner. Being even more interested after several scandals the G20 made another list of non cooperative countries. This time there are only grey countries (countries which promised to cooperate) and white countries (countries which cooperate or exchange date already). Austria, Switzerland and Liechtenstein found themselves on the grey list; in the mean time Austria and Switzerland managed to disappear and Liechtenstein is making rapid progress and taking much effort to reach this goal soon.

There is a magical number of 12 Tax information exchange agreements (TIEAs) which have to be concluded to be removed from the list. Up to now Liechtenstein has concluded eight tax information exchange agreements (TIEA) (USA, UK, Germany, San Marino, Monaco, France, St. Vincent and the Grenadines and Ireland) and two double tax treaties (DTA) with information exchange clause (Luxemburg and Andorra).1 This leaves the country another two treaties to negotiate. With some countries negotiations have gone very far already, but usually people are not informed until a treaty is signed officially. Negotiation partners mentioned in the newspapers are the Netherlands, Belgium, Italy and the Nordic States. One goal for Liechtenstein is to negotiate a regular double tax treaty after showing that cooperation in tax matters is possible. With many states negotiations on this concern have started already.

What is the usual content of such a TIEA? It is the exchange of information relating to the administration and enforcement of domestic tax laws or the prosecution of criminal matters between tax authorities upon request. Such a request needs to have and give substantial reasons; "fishing expeditions" are not allowed. A state must not ask for information that he himself can easily get in his own country. It also may not ask for information it would not be able to give, if it was asked for it. It must not answer a request which is against its "ordre public". Bank secrecy or any professional secrecy of a trustee does not protect a client from an information request. A lawyer must not give information on clients which ask for professional advice.

How does the requested state get the information? After receiving the request he will prove if it is correct. If this is so he first will check the information already available to him. In a second step he may ask persons where he suspects the information to be for assistance. If they do not assist there will be compulsory measures like house searches or/and confiscation of documents. These measures have to be arranged by a judge of the administrative court. There also may be interrogations of persons who might have interesting information. Then the tax authorities will overlook the information received and decide formally whether they will submit it to the requesting state or not. Only against this decision a person involved may appeal to the administrative court and he may only appeal once. Then the data will be submitted (or not). The other state may ask also to be involved in these actions (to be present at house searches e.g.) and may make interrogations itself with the consent of the requested state and the explicit consent of the person involved. Usually the other state may use any data received only in the case they asked for. They may publish the facts if a legal decision is published though. It is not important if a tax offence is regarded an offence in the requested country too, it is sufficient that the information is relevant for the requesting country and that it cannot get the information itself. The person, the information is about, will be informed by the person searched and then has the same procedural rights as an involved person. Still if the success of the action seems to be endangered by informing the persons involved neither of them will be informed.

This is just a general outline which has been made studying the TIEA with the United States of America and the Liechtenstein law which has been implemented to transfer this TIEA to local law. Of course all the tax treaties Liechtenstein is concluding at the moment and has concluded up to now are slightly different.

Most important for Liechtenstein is, that the past would not be touched wherever possible. This is also important from the point of the legal principle that legal measures should not have retroactive effects. Tax information will be exchanged with the US from January 2009, concerning earlier days there is a mutual legal aid treaty with the United States including tax matters, which was concluded in 2002. Concerning Germany and France information will be exchanged as early as from 1.1.2010 which leaves about three months to implement possible changes. Also for Andorra and Monaco the relevant date is 1 January 2010. For all of these agreements a domestic law which implements the treaties into Liechtenstein's legal system still has to be implemented. The most favorable agreement has been reached with the UK, leaving time until 31 March 2015 to become tax compliant. Requests concerning tax fraud may be made for actions after 1 January 2010 though.

A domestic legislation in Liechtenstein exists only with reference to the US up to now. It is very probable though, that these domestic laws will be more or less the same. Again a big exception will be the UK where there is a domestic law to come that will force trustees and bankers to encourage their clients to be tax compliant. If the trustee is not tax compliant he will be fined by Liechtenstein authorities. If he cannot be compliant out of reasons which are not his fault he may appeal to a panel which has to be implemented by then. All trustees will be controlled by independent auditors on regular bases (beginning 24 month after the domestic law comes into force, that means approximately from 2012 on). These auditors will have to submit their reports to the panel.

Together with the treaty a memorandum of understanding has been signed with the English tax authorities and a joint declaration of both governments completes the package. Whether this will be the end of Liechtenstein as a financial center or the beginning of a new period which may turn out beneficial at the end no one can predict . The world wide economical crisis increases the problems on both sides. All Liechtenstein virtues and much industry will be needed not to end up as the country started its successful period in the 1930s. The will of the government to prove that the country is capable of competing with the rest of the world is strong. It will be a big challenge anyhow.



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