Her Majesty's government is broke - a record £44bn in the red - and yet one estimate is that the taxman loses £18.5bn a year thanks to tax haven abuse.
In the past, the political will in Westminster to move against British protectorates such as the Bounty Bar island tax haven of the Caymans in the Caribbean and the fish-and-chip tax havens closer to home like Jersey, Guernsey and the Isle of Man, has been feeble.
But now that may be changing thanks to tough pressure from the new man in the White House and a drip-drip of revelations from tax havens, both independent and British-protected, that undermine bland assurances that everything "off-shore" is good for everybody "on-shore".
Stolen disks
Liechtenstein, the Alpine "off-shore" microstate sandwiched between Austria and Switzerland, was an international pariah after being placed on a blacklist of the three worst offending tax havens, along with Andorra and Monaco, by the Organisation for Economic Cooperation and Development.
Now it has been knocked sideways by revelations from a whistle-blower, Heinrich Kieber.
Kieber was a lowly IT worker charged with copying thousands of client files at LGT Trust (LGTT), part of the banking group controlled by Liechtenstein's ruling royal family.
In 2001 he stole electronic disks containing information on those clients and sold them to German intelligence, the BND, for five million euros.
This week, Klaus Zumwinkel, disgraced former boss of the German Post Office, became the first big name to be convicted of tax evasion thanks to Kieber's evidence.
He was forced to pay back 3.9m euros, was fined one million euros and given a two-year suspended jail sentence.
Named and shamed
Now millionaires and tax cheats around the world, including 150 punters in Britain, are being investigated because of Kieber's stolen disks.
When asked about LGTT Peter Lowy pleaded the Fifth Amendment
Liechtenstein's tax-haven's super-rich customers may not have enjoyed the activities of the United States Permanent Sub-Committee on Investigations, which last summer used Kieber's data to name and shame American citizens who had put money into LGTT trusts.
US citizen Peter Lowy, son of Australian billionaire shopping mall developer Frank Lowy, who developed the Westfield Centre in London's Shepherd's Bush, pleaded the Fifth Amendment when he was asked about the off-shore foundation LGTT set up when part of the Lowy American business empire was being wound up.
The Lowys say "net proceeds" were donated for charitable purposes in Israel and they have supplied bank statements and receipts to the Australian Tax Office to verify this.
They also say "none of the Lowys received any personal benefit" from the off-shore structure in Liechtenstein - and no tax was avoided or evaded in Australia or the US.
Royal audience
While reporting for BBC's Panorama programme in Vaduz, I managed to catch up with a member of the Liechtenstein royal family, His Serene Highness Prince Nikolaus Von Liechtenstein.
He was attending an openness seminar at the university in Vaduz. This being Liechtenstein, it was closed to the BBC's camera.
Kieber, who has something of a murky past, was placed on an Interpol wanted list by the Liechtenstein authorities.
However, Kieber's American lawyer is rather rude about the royal house of Liechtenstein:
"If the family business of the absolute monarch of this place is a felony, you don't have a country, you have a criminal enterprise," he told me.
Sea change?
I put that to His Serene Highness: "In America, Kieber's lawyer, Jack Blum, says that the Liechtenstein royal family by aiding and abetting tax evasion are effectively crooks. So the question is: are you a crook, sir?"
Eighteen tax havens are Crown Dependencies or British protectorates
The prince replied: "It is very clear that every country has its laws. America has quite different tax laws than Liechtenstein. If I evade taxes in Liechtenstein I have to pay a higher tax but I have no criminal prosecution. Only if I make tax fraud that is say I, I falsify documents, then I am also a criminal in Liechtenstein so we have a difference there."
As the credit crunch threatens worldwide recession, the patience of the great democracies in America and Europe, including Britain, to tolerate tiny microstates like Liechtenstein continuing to undermine their tax-raising powers may be ending.
But 18 of the world's tax havens are Crown Dependencies like Jersey, Guernsey, the Isle of Man or British protectorates like the Caymans, a fag-end of the British Empire in the Caribbean.
One man has targeted tax haven abuse in the Caymans - and his name is Barack Obama. So change for the world's tax havens seems on the way - whether the leaders of the micro-states like it or not.
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Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
3 February 2009
12 December 2008
A big bear market in Tax havens
(Hat tip to Duncan of http://www.learntotradefutures.com/)
FRANKFURT/ZURICH - More than a decade after holocaust survivors won compensation from Swiss banks for emptying Jewish accounts that had lain dormant since the war, the pressure is on again to dismantle Swiss banking secrecy.
This time, the tax collector is leading the charge.
With Washington joining Germany to press for an end to a code they believe helps tax dodgers, many see it as only a matter of time before the Swiss lift the cloak guarding the secrets of the world’s wealthy.
‘The challenge to bank secrecy is a thunderstorm which has been brewing since the holocaust money,’ said Sebastian Dovey of consultancy Scorpio Partnership. ‘It is a hot potato and I don’t think the heat is going to be turned down.’
Nearly one-third of wealth kept abroad globally is in Swiss banks: the Swiss Bankers Association and consultants estimate this at $2.2 trillion, making the Alpine state the globe’s biggest offshore centre ahead of Britain and Luxembourg.
But its code of secrecy-which local myth inaccurately claims was introduced to protect fleeing Jews-is as controversial as it is protective.
Laid down in a 1934 law, it has spawned plots for bestselling thrillers, but also reAl life intrigues such as that of Gizella Weisshaus.
Shortly before her father was murdered by the Nazis during the war, he told his children about gold coins and jewellery he had stowed away as Germany’s army marched towards their home in Romania.
‘I found the money and his gold watch hidden in the roof of my house,’ she told Reuters by telephone from New York. ‘And there were some pieces of paper. It didn’t mean anything to me.’
Decades later, the Auschwitz survivor was still trying to unravel the riddle of those long-discarded papers which likely contained the numbers of Swiss bank accounts.
But like many others who travelled to Zurich to trace her father’s money, she was turned away repeatedly.
She later became central to a series of legal actions taken against the banks and in the mid-1990s under pressure from Washington and Jewish community group the World Jewish Congress, they finally paid $1.2 billion for accounts they had sucked dry.
Now Switzerland faces its toughest assault since. In an escalation of a US investigation into its biggest bank, Raoul Weil, head of UBS’s wealth management business, was recently charged with helping Americans hide billions.
‘With the UBS case, Switzerland is under huge international pressure and pretty much back in the situation it was then,’ said Swiss Social Democrat party official and historian Peter Hug.
‘Holding onto bank secrecy is not going to work in the long term. Switzerland is small and it cannot afford to help tax evasion in its neighbouring countries.’
POLITICAL PRIORITY
Germany, which at the start of the year paid an informant for the names of tax dodgers who parked money at LGT bank in smaller hideout Liechtenstein, is also pushing for change.
‘In the end, Switzerland will have no way around declaring who its foreign bank account holders are,’ said Hans Eichel, who as German Finance Minister between 1999 and 2005 tried to tackle offshore havens.
‘This is a business based on a criminal activity-dodging tax in a neighbouring country.’
The Swiss have already made some concessions: introducing, for example, a tax on income earned by European Union citizens in Swiss accounts.
Stuart Eizenstat, US Deputy Secretary of the Treasury under Bill Clinton, said the dormant accounts case he helped negotiate prompted the Swiss to cooperate on other fronts.
‘I do think it had a catalytic effect of making the banks more open,’ he said. ‘They became strong supporters, for example, of the anti-terrorist financing measures. It did spur them to become more open on money-laundering.’
But with demands from Germany that Switzerland be blacklisted by the Organisation for Economic Cooperation and Development, pressure is rising for more.
‘The Americans said that if you do not cooperate, then we will make sure you cannot do business here,’ said Eichel. ‘European neighbours of Switzerland such as Germany have to consider similar measures.’
Many believe an agreement between Liechtenstein and the United States this week to drop bank secrecy in cases of tax evasion could force Switzerland into similar concessions.
Prince Nikolaus, the brother of Liechtenstein’s ruling monarch and the country’s ambassador to Brussels, said UBS’s problems and Germany’s probe of his family’s bank, LGT, sent a clear message to offshore havens.
‘It was these two banks-the biggest in their respective countries-which were turned into a big case,’ he told Reuters by telephone from Brussels. ‘It has symbolic value. It shows the political priority.’
AIR THINNING FOR ELITE
The pressure from Washington is unlikely to let up. As a senator, US president-elect Barack Obama introduced legislation early last year to make it easier to probe and prosecute tax dodging in offshore locations.
As president, he will need to fund an economic stimulus plan that analysts estimate could cost at least $500 billion.
Hug believes Liechtenstein’s move shows the air is also getting thinner for the Swiss elite. And he sees the first cracks appearing in the country’s usually unshakeable facade.
‘There is a conflict of interest between Swiss industry and the banks,’ he said. ‘Industry wants compromise on bank secrecy so that the country’s image is not spoilt.’
Switzerland’s banks-the liabilities of its two largest are more than seven times the country’s Gross Domestic Product-have been talking up the services they offer beyond hiding customer identity.
‘This is not all we have,’ said Urs Roth, Chief Executive of the Swiss Bankers Association. ‘We do have a number of traditional advantages, like the economic, monetary and social stability.’
Ultimately, however, it may not be the industry but Swiss pride that is the biggest hurdle to dropping bank secrecy. A nationwide vote would likely be needed to change the rules.
Few speak out publicly on the subject. No major Swiss bank wanted to discuss it with Reuters.
‘The Swiss are so brainwashed, that the bank there is untouchable,’ said Maram Stern, who as Deputy Secretary General of the World Jewish Congress oversaw negotiations with the Swiss banks about dormant accounts.
‘This was what the normal person on the street was not capable of understanding. There were people asking me: how can you question the bank?’
FRANKFURT/ZURICH - More than a decade after holocaust survivors won compensation from Swiss banks for emptying Jewish accounts that had lain dormant since the war, the pressure is on again to dismantle Swiss banking secrecy.
This time, the tax collector is leading the charge.
With Washington joining Germany to press for an end to a code they believe helps tax dodgers, many see it as only a matter of time before the Swiss lift the cloak guarding the secrets of the world’s wealthy.
‘The challenge to bank secrecy is a thunderstorm which has been brewing since the holocaust money,’ said Sebastian Dovey of consultancy Scorpio Partnership. ‘It is a hot potato and I don’t think the heat is going to be turned down.’
Nearly one-third of wealth kept abroad globally is in Swiss banks: the Swiss Bankers Association and consultants estimate this at $2.2 trillion, making the Alpine state the globe’s biggest offshore centre ahead of Britain and Luxembourg.
But its code of secrecy-which local myth inaccurately claims was introduced to protect fleeing Jews-is as controversial as it is protective.
Laid down in a 1934 law, it has spawned plots for bestselling thrillers, but also reAl life intrigues such as that of Gizella Weisshaus.
Shortly before her father was murdered by the Nazis during the war, he told his children about gold coins and jewellery he had stowed away as Germany’s army marched towards their home in Romania.
‘I found the money and his gold watch hidden in the roof of my house,’ she told Reuters by telephone from New York. ‘And there were some pieces of paper. It didn’t mean anything to me.’
Decades later, the Auschwitz survivor was still trying to unravel the riddle of those long-discarded papers which likely contained the numbers of Swiss bank accounts.
But like many others who travelled to Zurich to trace her father’s money, she was turned away repeatedly.
She later became central to a series of legal actions taken against the banks and in the mid-1990s under pressure from Washington and Jewish community group the World Jewish Congress, they finally paid $1.2 billion for accounts they had sucked dry.
Now Switzerland faces its toughest assault since. In an escalation of a US investigation into its biggest bank, Raoul Weil, head of UBS’s wealth management business, was recently charged with helping Americans hide billions.
‘With the UBS case, Switzerland is under huge international pressure and pretty much back in the situation it was then,’ said Swiss Social Democrat party official and historian Peter Hug.
‘Holding onto bank secrecy is not going to work in the long term. Switzerland is small and it cannot afford to help tax evasion in its neighbouring countries.’
POLITICAL PRIORITY
Germany, which at the start of the year paid an informant for the names of tax dodgers who parked money at LGT bank in smaller hideout Liechtenstein, is also pushing for change.
‘In the end, Switzerland will have no way around declaring who its foreign bank account holders are,’ said Hans Eichel, who as German Finance Minister between 1999 and 2005 tried to tackle offshore havens.
‘This is a business based on a criminal activity-dodging tax in a neighbouring country.’
The Swiss have already made some concessions: introducing, for example, a tax on income earned by European Union citizens in Swiss accounts.
Stuart Eizenstat, US Deputy Secretary of the Treasury under Bill Clinton, said the dormant accounts case he helped negotiate prompted the Swiss to cooperate on other fronts.
‘I do think it had a catalytic effect of making the banks more open,’ he said. ‘They became strong supporters, for example, of the anti-terrorist financing measures. It did spur them to become more open on money-laundering.’
But with demands from Germany that Switzerland be blacklisted by the Organisation for Economic Cooperation and Development, pressure is rising for more.
‘The Americans said that if you do not cooperate, then we will make sure you cannot do business here,’ said Eichel. ‘European neighbours of Switzerland such as Germany have to consider similar measures.’
Many believe an agreement between Liechtenstein and the United States this week to drop bank secrecy in cases of tax evasion could force Switzerland into similar concessions.
Prince Nikolaus, the brother of Liechtenstein’s ruling monarch and the country’s ambassador to Brussels, said UBS’s problems and Germany’s probe of his family’s bank, LGT, sent a clear message to offshore havens.
‘It was these two banks-the biggest in their respective countries-which were turned into a big case,’ he told Reuters by telephone from Brussels. ‘It has symbolic value. It shows the political priority.’
AIR THINNING FOR ELITE
The pressure from Washington is unlikely to let up. As a senator, US president-elect Barack Obama introduced legislation early last year to make it easier to probe and prosecute tax dodging in offshore locations.
As president, he will need to fund an economic stimulus plan that analysts estimate could cost at least $500 billion.
Hug believes Liechtenstein’s move shows the air is also getting thinner for the Swiss elite. And he sees the first cracks appearing in the country’s usually unshakeable facade.
‘There is a conflict of interest between Swiss industry and the banks,’ he said. ‘Industry wants compromise on bank secrecy so that the country’s image is not spoilt.’
Switzerland’s banks-the liabilities of its two largest are more than seven times the country’s Gross Domestic Product-have been talking up the services they offer beyond hiding customer identity.
‘This is not all we have,’ said Urs Roth, Chief Executive of the Swiss Bankers Association. ‘We do have a number of traditional advantages, like the economic, monetary and social stability.’
Ultimately, however, it may not be the industry but Swiss pride that is the biggest hurdle to dropping bank secrecy. A nationwide vote would likely be needed to change the rules.
Few speak out publicly on the subject. No major Swiss bank wanted to discuss it with Reuters.
‘The Swiss are so brainwashed, that the bank there is untouchable,’ said Maram Stern, who as Deputy Secretary General of the World Jewish Congress oversaw negotiations with the Swiss banks about dormant accounts.
‘This was what the normal person on the street was not capable of understanding. There were people asking me: how can you question the bank?’
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