If you have been lucky enough to visit the small Alpine nation of Liechtenstein (lucky enough, that is, to visit it for just a few days, before suicidal boredom sets in) you know that, during the right time of year, you can ski and walk through green grass in the same day and without traveling more than 10 miles or leaving the narrow confines of the country's borders. It's small enough that you shouldn't need more than a few days at the Park-Hotel Sonnenhof to poke around the Rhine valley, or the Austrian alps, which border the principality to the East, and deposit millions of dollars you would prefer not to let Inland Revenue, the IRS, or your ex-wife know about. I suppose you have to envy David Crawford a little as the Wall Street Journal reporter sent to Vaduz, the capital city, to report on the country back in February. (Just in time for a little skiing in Lech, Austria, I suppose).
To foreigners, the landlocked island has essentially two products. A dose of "quaint" and tons of secrecy. Well, not so much with the secrecy, it turns out.
A series of scandals going back to 2002 and involving the theft by former bank employees of customer data from almost every major bank in the country, and blackmail in the form of threats to disclose that data to various governmental authorities, has not only shattered the image of secrecy Liechtenstein formerly enjoyed, but now attracted the attention of no less than 4 national governments currently in the midst of serious tax evasion investigations, including the United States.
At one point Germany was paying what can only really be called "spies" to obtain tax data on its citizens by hook or by crook. (Bribery, sex, the usual inducements all played a role). You might well guess how long it took the horrified Swiss and Liechtenstein authorities to use the word "Gestapo" when describing the tactics which, in defense of the havens, do quite resemble certain efforts in the mid-1930s that caused the creation of modern bank secrecy laws in the first place.
All this highlights a larger debate on taxation and the role of tax havens in international finance, but it also leaves Liechtenstein, its two primary goods now tarnished, in a very difficult position. A full quarter of the country's GDP is in financial services, and another 26% above that is in "general services" at least obliquely connected to the banking business. Even a subtle drain on the primarily German and Austrian assets that Liechtenstein houses could prove dangerous to the country. All that before we even start to consider the kind of regulation that Liechtenstein might, finally, have to submit to.
I'm not quite sure what will become of Liechtenstein. Well, I suppose there is always the winery.
Which Is the Bigger Challenge: Tax Havens or High Taxes? [WSJ]
Posted by guest , Apr 11, 2008 8:56AM
any chance you could post the whole article?
Posted by guest , Apr 11, 2008 9:12AM
i'm so poor the IRS mails me money every year
Posted by ab , Apr 11, 2008 9:14AM
i believe that would be a copyright violation
Posted by guest , Apr 11, 2008 9:15AM
I think the governments have hit a new low. I totally see the 'tax evasion' crime here but if a government starts paying criminals for evidence (criminally collected) for use against its citizens - they I guess we are entering dangerous territory.
How long before criminals everywhere are hacking into everyone's financial and other data, tapping into all conversations and selling it to the government once something illegal is found? Would definitely not be a fun society. I am still trying to understand who in the German government could have possibly decided to pay off a criminal for his stolen goods.
Posted by guest , Apr 11, 2008 9:31AM
oh, i didn't know it was a pay-for article.
whatever that is carney's problem when he gets home.
Posted by guest , Apr 11, 2008 9:32AM
can't 12th level mage Carney cast a spell of shielding on this post so down jones won't see the article reprint?
Posted by guest , Apr 11, 2008 9:35AM
Truth is treason in the empire of lies.
Posted by guest , Apr 11, 2008 9:41AM
People get paid for revealing illegal activity by their employers all the time, even if they owed the employer confidentiality or collected information by dubious means. Qui tam lawsuits.
Posted by guest , Apr 11, 2008 9:49AM
WSJ gating is pretty easy to beat - just copy and paste the article title into google, the full article will be one of the top 3 or 4 hits.
There's an arb opportunity in Rupert having his cake and eating it too.
Posted by guest , Apr 11, 2008 9:50AM
Funny analyst comment of the day:
"You're the Chicago Cubs." - on the GE Call.
Posted by guest , Apr 11, 2008 9:50AM
Real estate is the opium of the capitalistic masses.
Posted by guest , Apr 11, 2008 10:15AM
Isn't the term "opiate" - i.e. something that gets them high, not necessarily opium.
Posted by guest , Apr 11, 2008 11:03AM
I knew some guy from Liechtenstein. He had the unfortunate name of Mr. Lipschitz. Probably the worst surname I've ever heard. I'm sure that one of you can make Mr. Lipschitz feel better though with an even worse surname.
Posted by guest , Apr 11, 2008 11:34AM
Lipschitz was Ralph Lauren's last name, before he changed it.
Posted by NomadTrader , Apr 11, 2008 12:52PM
These guys [like Swissy bankers] have been living off their undeserved reputation for years. About time some light got shined on these worms.
Posted by Lowly Assistant , Apr 11, 2008 7:33PM
The WSJ is really starting to sex things up a bit! Good to know Rupert's great-grandchild is an illustrator.
Some of the WSJ worker bees take smoke breaks outside our building. They talk beaucoup shit about NYT. They seem to carry much pride for their elbow-patched suit jackets. What a great job.