Liechtenstein » Tax Research UK

HMRC’s achievement – the legitimisation of tax haven abuse

HMRC, Liechtenstein, Switzerland, Tax evasion, Tax Havens, Uncategorized 19 Responses »

Oct 182011

Liechtenstein Prime Minister Klaus Tschuetscher said the principality will seek a withholding tax on undeclared German assets in its banks along the lines of a recently signed German-Swiss tax agreement, Die Zeit reported.

Liechtenstein’s government is in talks with Germany’s Finance Ministry about an agreement and Tschuetscher said he prefers new rules to take effect next year at the same time as the Swiss accord, he told the newspaper in an interview. There should be no regulatory gaps between Switzerland and Liechtenstein with respect to Germany, he said.

Well of course Liechtenstein wants that. Since the vast majority of assets in Liechtenstein are held in structures where there are no legal owners no assets will need declaration but the appearance of compliance and cooperation will be high whilst the game of abuse goes on.

This is what Dave Hartnett at HMRC set in motion by signalling the UK would sign such a deal. It’s still not clear Germany will, but he did for the UK presumably with the approval of George Osborne.

Remember that when you can’t get the medical services you need or your children can’t get the education they need: the Tories have gone out of the way to help the rich keep their assets well out of reach of tax authorities here and elsewhere, and deliberately so.

That’s the reality of what is happening. It’s neo-feudalism in action.

Liechtenstein reveals the weakness of the current European Savings Tax Directive

Liechtenstein, Tax avoidance, Tax evasion, Uncategorized 14 Responses »

Jul 082011

Liechtenstein has just announced the latest sums it has collected under the terms of the European Savings Tax Directive. It was a measly €7.8 million.

Working backwards this is 20% tax on €40 million interest. Assuming 2% interest, this is tax on interest income on € 2 billion capital (which may seriously overstate the case: German bonds paying over 3% p.a.).

Liechtenstein banks have € 140 billion assets under management.

So tax was levied on less than 2% of assets. Generously assuming only 40% of assets were fixed income then the savings tax is less than 5% effective in Liechtenstein which is no surprise with nearly 100,000 foundations, trusts, companies and anstalts in the Principality.

What is clear is that the case for reform of the European Savings Tax Directive is overwhelming given this massive failure of the existing arrangement to tackle serious tax abuse.

Do you remember when they said the Liechtenstein deal wouldn’t work?

Banking, HMRC, Liechtenstein, Tax evasion, Uncategorized 20 Responses »

Jun 132011

When the Liechtenstein Disclosure Facility was first offered by H M Revenue & Customs the tax profession said it wouldn’t rasie anything like the amount of money the Revenue estimated it would.

I’m still a critic of the scheme: I think it amazing that the UK is actually encouraging people ti use Liechtenstein banks. And I think it equally amazing that wealthy, criminal, tax evaders are getting away with penalties of 10% of the tax that they have evaded when people who have made innocent erros on their tax returns are paying higher penalties. That’s wrong.

But what is interesting is that the scheme seems to be working. As Accountancy Age has reported:

It seems as though the Liechtenstein Disclosure Facility is working. The figures obtained by Accountancy Age from a freedom of information request show that the average disclosure yields £300,000.

To put this into context, HM Revenue & Customs originally predicted that the initiative would bring in £1bn from 5,000 predicted disclosures at an average of £200,000 each. Having seen the initial success, it revised this figure to around £3bn. But how likely is it that it will reach this target?

Accountancy Age discusses the issue, at length, noting, in conclusion this:

The Revenue could attract far more individuals if the scheme were publicised more, he says, adding: “The number of registrations is meaningless because we don’t know how big the market is. HMRC is very coy about publicising the amnesty. It can easily triple and quadruple the number of disclosures if it were publicised.” It is a “political hot potato,” he adds, because the public are not happy about tax evaders being given an amnesty.

But they then add, giving the subject a new twist that there are two reasons why take up may be slow at present:

First, individuals are waiting for the deal with Switzerland to be finalised before entering the LDF. HMRC announced in October last year that a deal was being discussed. It has claimed throughout that any Swiss deal will not offer terms as favourable as those on offer.

That’s yet another negative to the Swiss deal.

The second reason, which is connected to the Swiss deal and even more important, is that the main thrust of the LDF has not yet begun: the Liechtenstein banks investigating their customers.

This is more important. As one commentator argued as a result:

Current registrations “are the trickle” and “the tap will be turned on” when this phase starts.

There’s good reason for that: there’s a wall of money out there: vastly more than HMRC are saying they think they’ll collect. And it’s time to get it. But the Swiss deal doesn’t help us do so.

Why, oh why, can’t we take the US line?

Liechtenstein structures will be within European Union Savings Tax Directive

EU STD, Europe, Liechtenstein, Tax avoidance, Tax evasion, Uncategorized 4 Responses »

Apr 252011

The following is for all serious offshore aficionados. It comes form the person I think the foremost expert on the European Union Savings Tax Directive – Mark Morris, and is from his blog, with permission.

What it says is at the end of the day simple, but vitally important, and that is that iof the European Union Savings Tax Directive is amended as the EU desires then Liechtenstein’s secrecy is cracked open. Which is very welcome indeed. Over to Mark:

“Liechtenstein is home to nearly 100,000 entities and legal arrangements which are effectively untaxed. These structure are used for succession planning, creditor protection, family support and confidentiality. Considering there are onshore taxable facilities that do these tasks equally well, one assumes the following Liechtenstein structures are chosen because tax efficiency is a prime motivator.

Aktiengesellschaft A.G. (company limited by shares)
Gesellschaft mit beschrenker Haftung GmbH (private limited company without shares)
Anstalt (establishment, commercial and non-commercial without shares)
Stiftung (foundation)
Treuunternehmen (registered trust)
Treuhandschaft (trust)
Partnerships [Limited, collective, simple, occasional & silent] (Not taxed on income from assets)

How Liechtenstein structures avoid tax:

Liechtenstein foundations, establishments and trusts have to date successfully avoided international taxes as they are crafted to present an image that no party involved can have a tax liability. This is done in seven stages:
1. Separate ownership of assets from the principal contributor: The principal contributorgives away their assets to someone else to manage on behalf of named or unnamed beneficiaries.		2. Disguise the source of assets: Utilise an agent /nominee to contribute the assets on behalf of the principal contributor. The only name on public record as the provider of funds is the nominee / agent, e.g. the lawyer who founds the foundation.
3. Utilise a temporary holder/ manager of the assets: The management cannot be taxed as they are not beneficial owners of the assets, but merely look after it for named or unnamed beneficiaries.		4. Disguise control of the assets: If the principal contributor is seen to be controlling the assets after giving it away, he may be liable for tax. Therefore the principal contributor manages the assets indirectly via an undisclosed letter of wishes / bylaws, appointment of protector, etc.
5. No beneficiary is immediately entitled to any payment received: No specific beneficiaries are named. Therefore no income tax payable.		6. Alchemy on income received: Convert the character of income into a tax efficient payment at a later date, such as charity, capital gain, wage, loan, etc.
7. Present a restricted view of structure to bank: The bank holding the structure’s account is the Paying Agent responsible for applying the savings tax. However, with a restricted view presented to the bank, a beneficial owner cannot be identified. As no-one supposedly owns the assets, the bank cannot apply the savings tax.

How the EU savings tax amendments will tackle Liechtenstein tax avoidance structures:

I. Structure becomes the Paying Agent Upon Receipt: To circumvent the bank’s limited view of the structure, the savings tax directive amendment moves the Paying Agent responsibility away the bank and onto the structure itself. The logic being the structure has an unimpeded true view of all parties involved.
II. The Principal Contributor is the beneficial owner : The amendment takes into consideration that it will be highly unlikely to identify a beneficiary immediately entitled to the payment received. In this case, the principal contributor of assets will be deemed the beneficial owner. The logic being that tax liability remains yours until transferred to someone else with a tax liability. In limbo doesn’t qualify for exemption.
III. Agent / Nominee is transparent: The savings tax directive looks through the nominee settlor / shareholder. A lawyer used to establish a foundation is merely an agent founder acting on behalf of the principal founder. The beneficial owner is deemed to be the individual who initially contributes the assets, directly or indirectly. According to the EU directive on money laundering and anti-terrorist financing, a nominee is a trust and company providing service and sand is therefore a candidate for Paying Agent Upon Receipt responsibilities.
IV. Paying Agent Upon Distribution if no contributor identifiable: In the event that a principal contributor is not identifiable, e.g. for a deceased settlor, then the structure becomes a Paying Agent Upon Distribution and must apply the savings tax to any individual who become entitled to the payment within 10 years
V. No more dummy charities: Trusts or foundations set up for charitable purposes will only be exempt from Paying Agent Upon Receipt responsibilities if they serve:- exclusively for charitable purposes, and for the public benefit. Mixed purpose or private charity foundations will thus be in scope.
VI. Bank accounts in Singapore / Dubai / Bahamas, etc also in scope: A knee-jerk reaction to move the structure’s bank account to beyond the savings tax territory will not avoid the savings tax provisions. The Paying Agent Upon Receipt must apply the savings taxirrespective of where the assets are held. This is similar to am economic operator securing interest from anywhere in the world.
VII. Run but you can’t hide: A fiduciary structure fleeing to outside the savings tax territory, e.g. to a Singapore trust, will not help the trust and company providers based within the savings tax jurisdiction. If the new structure is still effectively managed from within the savings tax territory, e.g. trustee, council or director is based in Liechtenstein, then the management will be a Paying Agent Upon Receipt, and consequently the structure will be in scope.

In summary, the EU savings tax amendment should end opportunities for tax avoidance using Liechtenstein structures for EU residents, as described in this PDF document guideline on Paying Agents Upon Receipt.”

Now you know why I am so keen on reform.

And why every honest taxpayer in Europe should share that enthusiasm.

Leopards (and Liechtenstein) don’t change their spots

Liechtenstein, Tax evasion 1 Response »

Jan 262011

From the Indian Business Standard:

Liechtenstein has declined help in India’s quest to trace suspected black money stashed in the small but rich European country bordering Switzerland, citing absence of a bilateral treaty for such information exchange.

The Indian government is facing intense pressure from the Opposition parties as well as the Supreme Court to take action against those who have stashed illicit wealth in foreign banks, mainly in Switzerland and other countries like Liechtenstein and Cayman Islands.

A Liechtenstein government spokesperson confirmed that India had sought administrative assistance and details of some Indian clients of LGT Bank located there.

“At the moment, we cannot reply to the content of the request (from India) since there is no legal basis, that is, no bilateral agreement for this,” the spokesperson said.

The spokesperson, however, said the Liechtenstein government had offered to negotiate a tax treaty with India, which would facilitate information exchange in future about suspected tax evaders and offenders of other financial crimes.

This issue has risen to prominence in India because of the extraordinary work of my friends at Task Force on Financial Integrity and Economic Development, who are fellow members of the Task Force on Financial Integrity and Economic Development.

But note what happens: there is a refusal to co-operate, and when and if an agreement is reached the impact will, of course, not be backdated.

Tax havens don’t change their spots. They’re there to help tax evaders. And that’s what they’re still doing. All from behind the veil of secrecy that they deliberately create for the purpose.

Germany says its legitimate to buy stolen tax haven data

Guernsey, Jersey, Liechtenstein, Switzerland, Tax evasion 3 Responses »

Apr 022010

Germany Reaps 200 Million Euros in Liechtenstein Tax Probe – BusinessWeek.

Business Week reports:

The German government has so far raised about 200 million euros ($270 million) in back taxes from secret accounts in Liechtenstein in the two years since it bought stolen bank data to track down tax evaders.

Chancellor Angela Merkel’s government said buying stolen information to find funds hidden in uncooperative tax havens is necessary, given the lack of automatic data exchange or legal assistance. Switzerland and Liechtenstein have refused to offer help if information presented has been stolen from banks.

Of course it’s legitimate to do so. This is the only way to tackle the corruption of those governments wthat refuse to participate in full information exchange.

Those commentators seeking to claim Jersey and Guernsey are as clean as a whistle please note.

Liechtenstein woos investors with tax amnesty

Liechtenstein Comments Off

Mar 062010

FT.com / UK – Liechtenstein woos investors with tax amnesty.

As the FT notes:

Prince Max of Liechtenstein is enticing wealthy investors up and down Britain to come clean over assets hidden abroad by promoting his tax haven’s “unique and attractive” amnesty.

The tiny Alpine principality, once famed for its secrecy, is opening its doors to evaders from other tax havens who want to take advantage of the generous disclosure facility it agreed last year with HM Revenue & Customs.

This is true. They’ve even called me to see if this blog might help the process.

I’m willing to talk. But I won’t promote Liechtenstein.

Liechtenstein’s LGT sees positive 2010 inflows

HMRC, Liechtenstein Comments Off

Feb 052010

Liechtenstein’s LGT sees positive 2010 inflows- WSJ | Reuters .

It’s reported:

Liechtenstein’s LGT Bank has had a good start to 2010 and expects “pretty positive” net asset inflow for the full year, despite ever increasing pressure on tax havens, its chief executive told the Wall Street Journal.

Liechtenstein’s largest bank, which became embroiled in a tax evasion scandal in 2008 after Germany paid a former employee for client data, has made an effort to become more transparent and is attracting client funds outside its home base.

All of which is amusing spin. The reality is something quite different. As anyone following UK tax amnesties knows, the terms of that offered to those with Liechtenstein accounts is much better than that offered to those without, and the incentive was created to therefore shift funds to Liechtenstein before fessing up to HM Revenue & Customs.

I put a very high bet on the fact that these inflows into Liechtenstein will soon all be flowing out to HM Treasury.

Which gives me some cause for pleasure.

Liechtenstein signs tax deal with Monaco

Liechtenstein 1 Response »

Sep 222009

Liechtenstein signs tax deal with Monaco – Finance – MSN Philippines News – News.

Every time another farce like this happens the OECD ‘international standard’ of 12 Tax Information Exchange Agreements looks more and more ridiculous.