Tax evasion is officially condoned by some countries

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According to the Wall Street Journal:

Switzerland and Liechtenstein are both actively inviting Germans to dodge taxes at home, German Finance Minister Peer Steinbrueck said in a speech to lawmakers Thursday, further fueling European tensions over bank secrecy and information sharing.

“I claim that there are jurisdictions, tax havens and national states that...are deliberately inviting German tax payers to transfer their money with the clear intent to dodge taxation” he said.

I have no doubt he is right. The evidence is unambiguous. These places refuse to sign up to the full EU Savings Tax Directive. They do instead allow the withholding tax option. By so doing they deliberately allow people resident in another country to receive income from banks registered in their domain and to ask that the income in question not be reported to their domestic tax authority. They must know there is only one logical reason for that request to withhold information to be made, and that is because the recipient intends to evade tax on the income received or has already evaded tax on the capital deposited. This must be the case: the EU STD says that is so, which is exactly why it has driven for automatic information exchange in the first place, precisely to beat the tax evasion that would otherwise take place.

By allowing this option to withhold information from other tax authorities these places (also including Luxembourg, Belgium, Austria, Guernsey, Jersey and the Isle of Man) must know they facilitate tax evasion. I cannot think of another explanation for the action they have taken, and have never heard them offer one. In that case Steinbrueck is right.

But it’s worse than that. These places also allow their banks to make payments to depositors who chose not to  exchange information  without filing suspicious transaction reports with regard to each and every person who refuses to supply such data suggesting that they have reasonable grounds for suspicion that the depositor in question might be tax evading. This is despite that fact it is supposedly the law in each of these places that such reports be filed on each and every occasion that such suspicion arises.

I am still a money laundering officer within the UK. I know that I could not be a money laundering officer in such a bank and not to file such a report: I would have to suspect my depositor of tax evasion if they refused to let me supply information with regards to their income received to their domestic tax authority  when that option was available within my domestic law, even if not obligatory. In that case the failure of these banks to report this suspicion, and the fact that none of them has been reprimanded for failing to do so, suggests that the support for tax evasion within these countries is systemic.

Again, in that case Steinbrueck is right. There are countries who support tax evasion by those who live in other states. And unless they change their ways we have to take action against them. We call them secrecy jurisdictions: places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain  that is designed to undermine the legislation or regulation of another jurisdiction and that, in addition, create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so. Steinbrueck calls them Switzerland and Liechtenstein, and more besides. We’re both right.

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