Is Lichtenstein suggesting real change?

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A fascinating article in the FT this morning. It says:

Thousands of British investors with up to £3bn stashed in secret Liechtenstein bank accounts will be asked to come forward voluntarily under a deal to be negotiated next week that could be the first of many worldwide.

Lawyers said the Liechtenstein plan, discussed behind closed doors with the Paris-based Organisation for Economic Co-operation and Development, could serve as an international model for other tax havens seeking to avoid an OECD blacklist.

Liechtenstein’s government announced on Thursday it would begin talks with the UK’s Revenue & Customs next Wednesday, stating it wanted to encourage “voluntary disclosure of untaxed assets”. The decision follows agreement by the tiny alpine principality to ease its bank secrecy rules and to encourage foreign account holders to come clean.

Dave Hartnett, permanent secretary for tax at Revenue & Customs, said the intention was “to open up the historic bank accounts”.

So much hot air was my immediate thought – and yet more flannel about the useless Tax Information Exchange Agreements. And then came this:

Liechtenstein is trying to break away from the traditional image of tax havens by proposing an imaginative long-term process to tackle undeclared assets that could benefit foreign tax authorities, without excessively penalizing the rich.

I hate the caveat since I am unaware of an ethical basis for there being different law for the rich, but let’s continue

Revenue & Customs wants to prise open secret accounts by offering an “offshore disclosure facility”, along the lines of the 2007 partial “amnesty” that raised £400m from holders of undeclared offshore accounts. That would be unlikely to offer immunity from prosecution, but would provide a straightforward mechanism with limited penalties for investors wanting to put their affairs in order.

Liechtenstein banks would be asked to close accounts of customers who did not act on this offer, presenting them with difficulties finding a home for their money.

I won’t raise my hopes yet – but I am not just an idealist. I am also a pragmatist. I know that the realities of life require compromise. I’ve already noted that today with regard to the proposed US tax amnesty.

I don’t like Lichtenstein horse trading for tax evaders. But candidly – I also want those people to pay their tax, to get back into the declared world, and to allow Lichtenstein and other havens to move forward.

The price of these deals has to be real cooperation. It has to be voluntary disclosure or the offer of addresses of those who do not cooperate. The move has to be multilateral – there is no reason why the developing countries of this world should lose out from such moves. And the move has to be linked to joining the EU STD as a full member with the end of the withholding option. But do that and require that data on all companies and foundations be put on public record to a standard at least the minimum set by the UK and I could buy this deal as real progress.

If this is what Gordon Brown means by requesting multilateral agreements with tax havens then there is a prospect for change from the G20.

The fat lady has not sung yet.

More than that – we’re still in the opening bars of the overture – but if this story hints at real change then maybe we’re beginning to explore some of the themes that will require development as this sage develops.