Tax Research UK

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.

Richard Murphy Liechtenstein

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.

Richard Murphy HMRC, Liechtenstein

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.

Richard Murphy Liechtenstein

My own profession can disgust me. Lawyers take the prize making nauseous though. Take this:

Opportunity for offshore account holders to slash the cost of using HMRC’s new “tax amnesty”

• Qualifying UK taxpayers advised to open a Liechtenstein bank account before making a disclosure
• More generous “tax amnesty” for offshore accounts opened locally rather than through UK branch or agency
• Savings could run to hundreds of thousands, or even millions, of pounds per account holder

UK taxpayers planning to declare assets held in offshore bank accounts under HMRC’s latest “tax amnesty”, which begins on September 1, could slash the cost of making a disclosure by transferring assets into a Liechtenstein bank account first, says McGrigors, the leading commercial law firm and tax investigation specialists.

Phil Berwick, Director of Tax Investigations at McGrigors, comments: “HMRC is offering far more generous terms to UK taxpayers with Liechtenstein bank accounts than it is to those with offshore accounts in other jurisdictions. By opening a bank account in Liechtenstein and transferring funds there qualifying taxpayers will be able to take advantage of these more generous terms and substantially reduce their total liability.”

HMRC’s New Disclosure Opportunity (NDO) and Liechtenstein Disclosure Facility (LDF) will offer reduced penalties to individuals and businesses with undeclared income or gains held in offshore bank accounts or investments if they make a full disclosure.

Under the terms of both the NDO and the LDF taxpayers will be required to pay the tax due on income and gains on their unassessed tax liabilities (including those arising on shore), as well as interest and, in most cases, a fixed 10% penalty.

However, under the NDO, taxpayers will be required to disclose undeclared amounts going back 20 years, whilst under the LDF account holders will be required to come clean just for the last 10 years.

Now I know which firm I’d be giving a very hard time if they brought forward cases from Liechtenstein if I was an HMRC inspector.

Note to McGrigors: HMRC read this blog.

And this sort of abuse is precisely why we need much tougher regulation of those allowed to practice tax law in the UK.

Time to refer, once more to Association for Accountancy and Business Affairs’ and Tax Justice Network’s Code of Conduct.

Richard Murphy Code of Conduct, Ethics, Liechtenstein

The USA has now charged four foreign nationals, three from Switzerland and one Liechtenstein with crimes related to tax evasion in the USA

Mario Staggl, a Liechtenstein citizen and resident who owns and operates a Liechtenstein trust company, New Haven Trust Co. Ltd.. He was indicted in 2008 with Bradley Birkenfeld for conspiring to defraud the United States by assisting Igor Olenicoff, an American billionaire, evade income taxes on approximately $200 million of assets hidden in Swiss and Liechtenstein bank accounts.

Raoul Weil, a UBS AG official, was indicted November 6, 2008, on a charge of conspiring to help 20,000 wealthy Americans hide assets from the Internal Revenue Service. He was declared a fugitive by a US judge in January 2009.

Hansruedi Schumacher, a former UBS banker, and Matthias Rickenbach, a Swiss lawyer with the firm Rickenbach and Partner, were indicted August 19, 2009, for conspiring to defraud the US government "in the collection of federal income. taxes."

So, what is the US doing to bring them to justice? Not a lot it seems. None of their names appear on Interpol’s list of individuals wanted by the US.

In that case what are Switzerland and Liechtenstein doing to help?

And where are they now? Does anyone know. And does the US Department of Justice really care?

Come on guys: it’s lawyers behind bars time; please get on with it.

Richard Murphy Banking, Corruption, Liechtenstein, Switzerland, USA

Forbes has published a profile of Dave Hartnett, the Permanent Secretary within the UK Civil Service responsible for HM Revenue & Customs. They say:

Dave Hartnett is taking strength from a baying crowd. As governments around the world call more loudly for a clampdown on tax evasion, [he] is doing all he can to stop wealthy Brits from hiding their money in tax havens. Having shifted to "Dave" from "David" a decade ago, his informality and aggressive persona may well have aided crucial negotiations to drive through the clampdown.

Hartnett, who led the team that brokered the deal, says it took 14 months of talks, some taking place in the home of the British ambassador to Switzerland, to gain the trust of Liechtenstein’s authorities. Now he expects to rake back 1 billion pounds ($1.7 billion) in lost tax revenues over the next five years as a result of the agreement.

As they note:

Hartnett, who became a tax inspector soon after graduating from Birmingham University with a degree in Latin, is known in the financial industry for his hard-line stance on tax evasion. "We want people to pay their fair share," he says. "Rather like most other countries we’ve got hospitals and schools to build, we’ve got welfare payments to make."

And they sought third party evidence:

"He’s the hardest tax negotiator the Revenue has ever had," said Richard Murphy of British consultancy Tax Research. "Don’t argue with him."

But so what? What’s next?:

Harnett hopes the Liechtenstein deal can be copied with other countries, and says his department would be prepared to help facilitate the discussions. "The U.K. wants to make a big contribution to tax compliance generally." Hard to argue with that.

True, but I do know that there are those in his department who are not, shall we say, wholly committed to the cause. Certainly any mention of Automatic Information Exchange goes down like a lead balloon with some at HM Treasury, where he is based. And that is not helpful right now because if the Liechtenstein deal proves anything it is that Dave Hartnett believes that Tax Information Exchange Agreements cannot deliver by themselves.

We’re looking for more from the UK at the OECD Mexico meeting as a result.

Richard Murphy HMRC, Liechtenstein, OECD

PRIVACY ORIENTED | From the age of BIG BROTHER – greetings! » Blog Archive » The Somalia Offshore Banking Scam Exposed [UPDATED 3].

For all I know the exposure is also a fraud

But its good reading

What’s amazing was the address for the Somali finance centre was in …..Liechtenstein

Obvious, isn’t it?

Richard Murphy Corruption, Liechtenstein

Associated press were one of the many agencies I spoke to yesterday (some of whom have given no credit for the data supplied – such is life). The have a story that in one incarnation is here:

 Liechtenstein’s agreement to help Britain recover taxes on wealth hidden away in the tiny Alpine principality by U.K. taxpayers is only the latest sign that traditional tax havens are yielding to governments hungry for extra revenue during the economic crisis.

"The agreement signed today is a very significant development," said Jeffrey Owens, tax policy director at the Organization for Economic Cooperation and Development. "It shows that the days of bank secrecy as a shield behind which evaders can hide is rapidly disappearing," Owens said.

Yet some experts see a flaw in most of the deals signed so far."The standard of proof that the inquiring country has to reach before it can submit an information request to a tax haven is so high, that they basically have to know all the information about which they’re asking," said Richard Murphy, director of British-based policy consultants Tax Research LLP.

"It is almost impossible for tax inspectors to create an audit trail connecting me to that bank account, unless I’ve been stupid or they strike very lucky," said Murphy.

He did – rather odd though that the simplified language used to explain how these things work – in which I played the role of abusive taxpayer – got into the article. But as they went on to note, I added:

Still, the accord between Liechtenstein and Britain breaks new ground.

Not so fast says Liechtenstein in response:

"The agreement is specific to the British tax system and can’t be used as a blueprint, but it could show the way for future accords of this kind," said Max Hohenberg, spokesman for the Liechtenstein government.

Well, I anticipated that:

Murphy, who campaigns for greater tax transparency, isn’t convinced the Liechtenstein deal is enough. "We are making progress, but we’re a long way from seeing a solution yet," he said. “Revenue services in several countries are already wising up to the fact that without some sort of active disclosure on the part of tax havens — such as by automatically reporting the real owners of accounts and companies to their governments — investigations will fail at the first hurdle. They know that behind the PR schmoozing there is a problem with this process."

He said some way has to be found to make available "smoking gun" evidence tying an individual to an offshore account.

But as the article notes:

Getting tax havens to agree to actively give up the names of their foreign clients is a step too far, even for Liechtenstein.

"At no point will we automatically provide information to other countries," said Hohenberg. "We’re trying to reach agreements that will block any moves toward automatic disclosure."

So, as I said, we still have a long way to go.

And Liechtenstein still has a lot to learn about coming in from the cold.

But they will learn it, eventually. They won’t have any choice.

Richard Murphy Liechtenstein, TIEA

The Financial Crimes: Liechtenstein: Trust me.

A Liechtenstein Trust is set up by a deed between the settlor and trustees. The trust deed does not have to name the beneficiaries. If the trust deed is deposited with the Liechtenstein Registrar of Trusts, it will not be publicly available, and later instruments, which might, for example, name beneficiaries, who might just happen to be Anglo Saxon, do not have to be disclosed. So if the trust is established with Liechtenstein trustees, there is no reason why the details of UK resident beneficiaries should show up in an audit.

For once I’m going to argue against the case presented here: know your client rules should disclose the UK link.

If they don’t we have a much bigger problem with Liechtenstein.

Of course that is possible: the new deal is predicated on there being real reform in Liechtenstein. If it really is a sham then the gains will be limited, money will leave without anti-money laundering suspiscious transaction reports beingn filed and cash recovery will be low.

But having toured the BBC yesterday talking about this issue I’ll confirm just exactly what I think: underlying this agreement is a weak Tax Information Exchange Agreement. Laid on top of it is the evidence that no one has confidence in Tax Information Exchange Agreements: the Proactiave Information Exchange Agreement as I have called it.

The PIE may not work. But sometimes you just have to try, and it’s better than just having a TIEA. Which is why I was trumpeting this as good news.

But I’ll be quite candid: I can be proved wrong.

Richard Murphy Liechtenstein

I’m not going to get over-excited, I hope, but I think the new UK / Liechtenstein Tax Information Exchange Agreement moves information exchange into a new era.

This deal is like no other Tax Information Exchange Agreement. Take this from the preamble:

The Government of the Principality of Liechtenstein and the Government of the United Kingdom of Great Britain and Northern Ireland (together “the Contracting Parties”) desiring to:

(a) regulate the exchange of information with respect to taxes between the Contracting Parties and facilitate tax cooperation and taxpayer assistance, and

(b) assist the maintenance and development of the Principality of Liechtenstein’s financial services industry,

have on this date reached an understanding covering various matters including the introduction by the Government of the Principality of Liechtenstein of a five-year taxpayer assistance and compliance programme and the introduction by the competent authority of the United Kingdom of a five-year special disclosure facility.

It is the Contracting Parties’ intention that by the conclusion of the five year period contemplated by the taxpayer assistance and compliance programme, there will be no beneficial owners who are liable to taxation within the jurisdiction of one Contracting Party who are using the laws of the other to disguise such liability without paying appropriate tax in the manner contemplated by the understanding.

Then look at the standard TIEA. You’ll see they are poles apart.

The standard TIEA is, to all intents and purposes, a passive document. The tax haven / secrecy jurisdiction signs it, sits back and waits for something to happen. In the case of the rush of them with the Faroe Islands I am sure nothing will ever happen. I suspect that may be true of others: the Belgian / San Marino one, for example.

But even if something happens the entire onus for action is on the requesting party, which will almost always be the major state. And only when they have surmounted the enormous impediments to action built into the standard TIEA will they actually have to respond to the request received, to which the answer can be ‘sorry, can’t do’.

Not so in the case of the Liechtenstein deal: this deal requires action of Liechtenstein, action that will be audited. What is more, that action has a timescale attached to it and a performance criterion is set: there will be no UK tax evaders left in the place after five years.

This is something altogether new in information exchange: so new I’ll give it a name: Proactive Information Exchange (PIE), giving rise to Proactive Information Exchange Agreements (PIEAs).

Liechtenstein is now a party to ensuring tax compliance in the UK (as is the UK to ensuring tax compliance in Liechtenstein, I should add): and it’s not a passive party, but an active one. It has a duty to ensure that no one uses its secrecy to evade UK tax (and vice versa, which is not without problems for the UK – which is why I also welcome this deal).

I mentioned the OECD meeting planned for 1-2 September yesterday. This deal blows the agenda for that meeting apart in my opinion: Tax Information Exchange Agreements look crazy when something like a PIEA might be available.

Where now for information exchange?

Well, I stick by the need for Automatic Information Exchange (AIE), and the need for an agreement on what must be exchanged to make AIE work of the sort I have proposed. But all credit to the UK’s HM Revenue & Customs: we now have a new agenda of PIEAs into which AIE can fit – and that is very good news indeed.

Richard Murphy HMRC, Liechtenstein, Secrecy jurisdictions, TIEA, Tax evasion