Liechtenstein and Banking Secrecy

When was the last time you saw Liechtenstein in the news? My first visit there was in 1983 when I was a student in Austria, and I can't recall it being in the news since, at least not for anything significant. But now Liechtenstein is caught up in a banking secrecy and tax evasion row with Germany.

I'm with Liechtenstein on this one and here's why. Banking customers can reasonably expect a degree of privacy when it comes to their personal information and financial records. If there are allegations of illegal acts, including tax evasion, then due process should be followed to release any associated records. In the meantime, innocent until proven guilty.

What appears to have happened here is that German intelligence authorities paid an informant, named by some publications as Heinrich Kieber, up to 5 million Euros for DVDs of client information held in a Liechtenstein bank.

As of this writing, although several German taxpayers have settled up under threat, I am aware of no legal ruling confirming tax evasion by anyone. What would appear to be illegal are both the actions of the informant for selling confidential customer information and the actions of the German (and possibly also British) governments for espionage.

I'd also have to admonish the bank, LGT, for lax security controls that appear to have allowed one person, acting alone, to access and download a large volume confidential account information.

In addition, possession of an account with strong banking secrecy does not imply wrong-doing. There are many legitimate reasons why one would want such data secret, including the simple desire for privacy.

I've said nothing in this post about taxation rates or the motivations for evasion. That's not the point. What is at issue is that Germany appears to have resorted to extra-legal means to acquire information that could have been acquired through an EU legal process.

The Cato Institute has a good article in defense of tax havens. In addition to keeping taxes low for everyone by keeping tax-hungry jurisdictions honet, "(r)esearchers have found that tax havens consistently rank as the best governed, most stable, fastest growing and most prosperous places in the world. Promoting better policy in other nations, though, may be their most important role. "

Updated news here.