Liechtenstein, whose reputation has been sullied by a global tax evasion scandal, is ready to reform its banking system, Prime Minister Otmar Hasler said in an interview published Saturday."The reform process has already begun and I support it being continued," he told Swiss newspaper Neue Zuercher Zeitung.
But he added: "That must carry on independent of any attempt at pressure."
Liechtenstein, a tiny principality wedged between Austria and Switzerland, is under pressure from Germany and other countries following investigations into suspected mass tax evasion through accounts in the country.German Chancellor Angela Merkel has called for greater transparency in Liechtenstein, where investors can use foundations to buy or hold assets anonymously.
Hasler admitted such foundations needed reform and said he would work towards a "reasonable compromise" on banking secrecy. He has previously been very critical of Germany's demands for more openness.Germany is investigating about 1,000 people it suspects of avoiding tax through investments in Liechtenstein.Germany has admitted buying a list of clients from a former employee of a Liechtenstein bank and providing names to other tax authorities around the world.Heinrich Kieber, a 42-year-old now thought to be living under a new identity in Australia, allegedly used the information to bribe Liechtenstein authorities into reducing a prison sentence he faced. Liechtenstein obliged, the discs were returned, and it thought the matter ended there. The problem was that Kieber made copies of the files. In 2006, he touted the data to the UK Inland Revenue. Strangely, it refused to buy the information.But last June the German secret service paid €4.2m for the discs. The information was shared with US authorities. Seven months later, on Valentine's Day, German investigators made their first move with the arrest of one of the country's most prominent businessmen. There will be many more.
Europe's tax haven of choice for the past 90 years is now threatened with closure, say senior investigators. The Observer understands that German detectives believe some accounts may be linked to organised crime. Liechtenstein drug police officers are now contacting their German counterparts for more information. If links are proved it could spell the end for the principality. German banks are discussing arrangements to pull out of Liechtenstein in a sign that the country is becoming a pariah financial state. The first could go next week. At the very least it is facing the prospect of losing its essential calling card: secrecy.
Perhaps more significantly, world governments and multilateral institutions are stirring. Tax authorities from every continent have received details of hundreds of suspected tax evaders with the proof that until now has eluded them. Determined to crack down on tax shelters draining exchequers of funds, the imprisonment of some of Europe's most prominent business figures is now a distinct possibility.
As investigators trawl through 1,250 names with a collective fortune in the tens of billions, London bankers fear being drawn into criminal proceedings, not surprising given the regularity with which English accents are heard on the streets of Vaduz. Among the 100 alleged British tax evaders are those with 'sensitive political connections', say sources close to senior figures connected to the investigation.
This week Alistair Darling will face questions from Liberal Democrat shadow chancellor Vince Cable over whether any of those investigated, who have yet to be named, claim non-domicile status or have given political donations and why the Revenue initially refused to buy the information.