Liechtenstein's heir backs radical new tax plans
Tall, dweeby, and the heir to a throne, Prince Maximillian is an unlikely player in the arduous task of British tax collection. Yet the Prince of Liechtenstein has become part of an ambitious plan to collect millions of pounds in undeclared taxes from foreign bank accounts.
Two weeks ago, Liechtenstein, once a byword for off-shore tax evasion, passed radical laws that, in conjunction with HM Revenue & Customs, are designed to extract every penny of tax owed to Britain from its opaque bank accounts.
Under the rules, which will come into force in September, every bank account in Liechtenstein will be subject to a mandatory tax audit. Clients will have to pay their taxes, taking advantage of a specially designed amnesty package with the HMRC, or take their money out of the state.
But rather than triggering a rush for the borders, the tiny European state has in recent weeks become a magnet for British tax avoiders – not to hide their cash, but to pay up.
HMRC says it expects to extract as much as £1bn from existing accounts in Liechtenstein. But British tax avoiders from other jurisdictions are piling into Liechtenstein to take advantage of the unique amnesty under which just 10 years of tax is payable, rather than the usual 20 years.
They can also remain anonymous.
In a rare interview, Prince Max, who is also chief executive of Liechtenstein's biggest bank, the LGT Group, told The Sunday Telegraph: "For those who have wanted to use off-shore tax havens for tax evasion, the risks have dramatically increased. Forty years ago, the risks were low. With surveillance and intelligence, the risks are now very high.
"People from other countries, like Switzerland, are grasping the nettle and coming to take advantage of the Liechtenstein Disclosure Facility to come clean, too."
A spokesman for HMRC said: "Before the Liechtenstein agreement, many people had assumed that the use of tax havens to get around the law was a problem that could simply never be cracked.
"The enlightened approach taken by the Liechtenstein government has proven the cynics wrong."
The positive relationship was unimaginable a few years ago.
In 2002, Liechtenstein, which manages assets of around CHF160bn (£100bn), was branded an "un-cooperative tax haven" by the Organisation for Economic Cooperation and Development (OECD), but its attraction to tax avoiders started long before.
Prince Max says Liechtenstein made its name "between the Wars" when his grandfather set up a discreet banking system that, he says, has "literally been in place without significant changes until about 2009".
He says the system has been no secret. "[Western governments] have all known that undeclared money was off-shore for 30 years. Why the change of gears in 08/09? The context was the global financial crisis and states realising they need more money.
"They looked to off-shore money as an opportunity to bring taxpayers' non-declared money to declaration. The US and the leading political forces in Europe built a consensus around attacking that issue under political pressure."
For Prince Max and his family, the attention came as a shock. He said: "We were particularly vulnerable because of the data theft of a raft of our bank account details in 2002."
The details of thousands of bank accounts had apparently been stolen in 2002 from Liechtenstein banks by a former IT worker. In the wake of the global crisis, western authorities were interested in the CD and allegedly paid millions of euros for its contents.
Prince Max says: "They paid money to the thieves and we came under more pressure."
He carefully sidesteps suggestions of duress simply saying that "some countries were more sensible and stylish [in their investigations], others were... less elegant."
He adds: "We understood their fiscal problems and we had sympathy for concerns so we said, let's address this in a constructive way."
America, predictably, was dealt with first; Germany was the "noisiest" but, through the OECD, Liechtenstein worked out a system of tax information and exchange agreements with a raft of countries. A "more creative and innovative" system was devised with the UK.
Prince Max denies that off-shore banking is being dismantled. "Off-shore banking is not going to go away, ever," he says. "The advantages are far more than tax evasion. The world is never stable and we offer diversity for investors in terms of assets, institutions, jurisdictions. Liechtenstein is stable, we have a strong Swiss currency and no deficit."
Although 40pc of Liechtenstein's 35,000 people work in industry, financial services produces the lion's share of the national GDP. The country has 16 banks including LGT which describes itself as the "wealth and asset management group owned by the Princely House of Liechtenstein". Thought to the biggest private money manager in the world, LGT has offices across Europe and Asia.
Its work ranges from helping Arabs set up trusts for their daughters (not possible in Saudi Arabia) and Greeks protect their savings (the 16th bank has been founded this year using the wealth of one Greek family) to hedge fund and private equity investments.
For LGT in particular, the HMRC agreement is giving the bank a new, clean image.
Prince Max says: "It's helping our asset management and hedge fund efforts that sometimes have been impacted by the political angle. We want to pitch for business without any connotations expect that we have won awards for our services."http://www.telegraph.co.u...adical-new-tax-plans.html