Liechtenstein: From ‘Tax’ to ‘Safe’ Haven?

Quick to seize an opportunity presented on its back door, Liechtenstein is promoting itself as “an oasis of political and economic stability amid the turmoil of the euro zone debt crisis”.

As Prime Minister Klaus Tschuetscher begins the rebranding of his country from ‘tax’ to ‘safe’ haven, this week he spoke to reporters about his country’s new campaign.

Given the parallels to other OFCs, Reuter’s report on the PM’s interview is worthy of reproduction in full:

“Liechtenstein was earlier a tax oasis and is now an oasis of stability. Political stability is one pillar and economic stability is the other,” Tschuetscher, 45, said in an interview.

“I believe that after the crisis, sensible investors will be asking themselves ‘where is my money safely invested, where do I have stability and high standards so that nobody makes off with my money or speculates with it?'”

Liechtenstein was removed from a global black list of uncooperative tax havens in 2009 when it agreed to help hunt foreign tax dodgers after data leaked in 2008 revealed hundreds of wealthy Germans had hidden assets in its banks.

That, compounded by rocky markets and a rise in the Swiss franc – Liechtenstein’s official currency since 1924 – slashed assets managed in the country from a 2007 peak of 153 billion Swiss francs ($214 bln) to 109 billion at the end of 2011.

Tschuetscher took over as head of a coalition government in February 2009, in the aftermath of the German scandal, and has pushed Liechtenstein’s banks to clean up their act.

“The time is over for business models which service tax evasion. We don’t want that. It is too risky,” he said.

Tschuetscher said an amnesty for suspected tax evaders he helped negotiate with Britain in 2009 was on track to yield 3 billion pounds ($4.7 billion) for the British treasury. He also hopes for deals with Germany, Austria, France, Italy and the United States to tax and regularise undeclared accounts.

While the country’s biggest bank LGT, which is owned by the royal family, was ensnared in the German affair, U.S. authorities are investigating the second biggest, LLB, for helping rich Americans avoid paying tax.

Despite its tax troubles, Tschuetscher said Liechtenstein’s financial sector – which contributes about a third of gross domestic product and 16 per cent of employment – had come through the financial crisis relatively unscathed.

“Our banks never gambled in investment banking. Our banks never had discussions about exorbitant pay and compensation. Our banks were stable. They were generally risk averse and have reacted quickly to this situation,” he said.”

He admitted the changes in the industry were causing “lean times” and would likely trigger consolidation, possibly even involving the biggest three banks LGT, LLB and VP Bank.


Banking has helped make the 36,000 inhabitants of the 160 square km (62 square miles) principality wedged in the Alps between Switzerland and Austria among the world’s wealthiest – with national output per head seen at $141,000 in 2012.

One way Tschuetscher’s government hopes to make up for the loss of tax evading clients is by attracting hedge funds from Switzerland – it wants to be the first to adopt new European Union rules governing alternative investment fund managers.

Tschuetscher said the system of sharing power between the monarchy and elected representatives contributed to political stability and allowed Liechtenstein to be nimble and business-friendly when it comes to such regulation.

“We have no major ideological disputes,” he said. “We don’t have this constant proposal of new tax ideas which is poison for investors.”

In February, ratings agency Standard & Poor’s confirmed its ‘AAA’ rating for Liechtenstein, citing “stable and conservative policies… which we expect to continue.”

Tschuetscher said he did not expect a constitutional crisis to result from a referendum called by pro-democracy activists that seeks to end the monarchy’s right to veto legislation.

“The princely house is as integral to Liechtenstein as is the Rhine which makes the border to Switzerland, and the Swiss franc,” he said.

“The people of Liechtenstein know what they get from the princely house and the princely house knows what it gets from Liechtenstein. It is such a symbiotic relationship that nobody will give that up easily.”


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