Liechtenstein news: Banking sector grows in first half 2014 despite “end” of bank secrecy

Vaterland.li reports that:

“Most banks in Liechtenstein’s finance centre have increased the assets they manage in the first semester. This growth was not linked to overall development of financial markets, but in particular to the influx of new money.

VP Bank, Centrum Bank and Neue Bank all attracted larger amounts of new money in comparison to the assets lost due to the end of bank secrecy.”

The Vaterland.li article also provides insight into how the local banking sector is repositioning itself:

“However, the banking sector is not yet out of the woods. For example, the Liechtenstein Landesbank has experienced a net exodus of client assets as a result of its ongoing restructuring. Its asset outflows back to neighbouring countries were larger than inflows from strategic growth markets in Central and Eastern Europe as well as the Middle East.”

Note: It may be a bit early to say that Liechtenstein bank secrecy has ended. Although Liechtenstein has committed to implement the OECD’s automatic information exchange standard, the standard has a number of weaknesses which limit its effectiveness, in particular as regards sharing information with developing countries. For more details please see the Tax Justice Network, Financial Transparency Coalition and Christian Aid.

– In other Liechtenstein-related news, the UK’s Telegraph reports that

“Expats who have failed to pay their taxes may find the attractive option of using the Liechtenstein Disclosure Facility (LDF) blocked, thanks to changes made to it recently.”

The Telegraph article goes on to explain that:

“The LDF is an agreement on tax reached in 2009 between the United Kingdom and Liechtenstein. Contrary to what its name suggests, however, it can cover assets hidden anywhere offshore.”

“Under its terms there is a guarantee that those who come forward and make a voluntary tax disclosure will not be prosecuted. Instead they can make financial restitution at a reduced price.”

The problem?

“HMRC believes that the LDF was being abused by employers who used employee benefit trusts to avoid tax, and so it has now restricted access to the some of the favourable terms that were on offer.”

A partner at a tax dispute resolution firm gives further background:

“…it now appears that many HMRC inspectors are unhappy that it allowed taxpayers with existing enquiries to benefit by moving their case into LDF.”

Given that some of the world’s leading accounting firms continue to advertise the Liechtenstein Disclosure Facility as “an umbrella for the disclosure of any tax liability connected with an overseas asset” on their websites, it is perhaps unsurprising if some people got carried away.

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