I dealt with the ethics of Germany securing information on tax evasion by its citizens in Liechtenstein by paying an informer yesterday. The FT has tackled the issue today in its editorial. It says:

There must be tight controls on the ability of governments to spy on their own citizens, but unco-operative tax havens deserve this kind of treatment.

It adds:

There are circumstances in which banking secrecy laws are just. The rise of Switzerland and Liechtenstein as tax havens began in the 1930s, when their laws protected German Jews who sought to put their money beyond the reach of Nazi agents. But limited co-operation with tax authorities will hardly result in the persecution of modern-day Germans, and nor does it end their legitimate right to invest wealth offshore if they so choose.

This is correct, and as part of the process of ending tax haven secrecy mechanisms to protect the genuinely vulnerable will be needed. I think this might be a role for state run banks, but will address the issue on another occasion.

What the FT concludes is:

But governments are right to insist that those who live in a country, and benefit from public services, pay tax. That means they have to act against jurisdictions such as Liechtenstein that abet evaders.

In that context, a €4m bribe to a bank official is money well spent. The direct benefit - information on Germans suspected of tax evasion - is the least of it. Far more important is the blow struck against Liechtenstein's refusal to co-operate, and the demonstration to future evaders that there is no such thing as guaranteed bank secrecy.

There must be safeguards. Civil authorities should insist that their security services have grounds to suspect tax evasion before turning them loose. Data that is not of use in criminal investigations must be destroyed. But the only answer to tax havens that do not co-operate may be to send in the spies.

I applaud this. I applaud the implicit recognition that the criminal activity of tax evasion and money laundering is state sponsored by Liechtenstein and the other tax havens that promote the secrecy that allows it to occur.

But what it disappointing is that there is no recognition of the role of professional firms of lawyers and accountants and of banks and trust companies in pursuing these activities.

Yes we can send in spies. But other sanctions are possible. I'll address these later.