Liechtenstein has announced that it is going to abandon some of its banking secrecy and offer information exchange under OECD protocols.

Let’s be cool and calm about this. First this is progress. That’s welcome. But it’s happened afte the hot money has gone — money has been flooding out of Vaduz apparently since for all practical purposes the place was shot down by last year’s leaks. This therefore is a last gasp action of a failing micro-state to support a dying economy.

Let's also not get too excited - as I have said many times before if all we are talking about here is TIEAs then the standard of proof required before data is exchanged is so high that the amount of data exchanged will be tiny. I have little doubt that Liechtenstein is well aware of this, and the timing of its announcement before the G20 and its obvious desire to avoid being on any tax haven list (which I think I can safely say is an entirely forlorn hope) is cynical in the extreme in that context — it is actions not words that matter.

As cynical is their suggestion that they will offered more advanced cooperation if those who have been tax evading through their banks are offered favourable terms to come clean by the places where they live. Let’s unpack this. First, it is an admission that they have known all along that there are people using their banks for tax evasion. So much for the credibility of all their past claims (other tax havens / secrecy jurisdictions please note). Second is their extraordinary arrogance. Here we have a state that has effectively  been assisting people to manage stolen goods seeking to negotiate an amnesty for their criminal associates from whom they have profited with the appropriate regulatory authorities. I do not think Liechtenstein has any right of any sort to impose terms on information exchange right now - that is for us to do.

Lastly — let’s cut to the chase. This announcement shows the limitation of defining cooperation as being based solely on the OECD tax information exchange model. If Liechtenstein wants to prove it is serious then there is a much better test available — it must agree to full automatic information exchange under the terms of the EU Savings Tax Directive without any withholding tax option being available for those who want to evade their obligations in their home states. This would mean that by 2012 when the revised version of this is expected to come into force that there would be no place for most tax evaders to hide in Liechtenstein. If they do not agree to this then it will still be a haven for evaders. This is the acid test. I await to see what they say on this one. If that is offered then the G20 is really biting. If not the G20 needs to take note and up the ante.