Tax Scandal
The Liechtenstein investigation has had worldwide implications
In February, Germans awoke to the country's largest tax scandal, when tax authorities announced that they were launching an investigation into the tax haven of Liechtenstein.
More than 750 of the country's wealthiest citizens were suspected of using anonymous trust structures in LGT Bank in the principality to avoid high marginal income and inheritance taxes, which can approach the 50per cent mark. The resulting scandal saw a number of executives resign as a result of the investigation. The most notable of which was that of Deutsche Post chief executive Klaus Zumwinkel who resigned amid allegations that he failed to pay up to Euro1million (HK$11.99million) in tax due on a Liechtenstein trust.
While the scope and nature of the affair was notable, what truly sensationalised the case was the manner in which German authorities seized the account information in the first place.
Germany's Federal Intelligence Service (BND) admitted that it paid an informer more than Euro4million for the list of German investors with an account at LGT Bank.
The move revealed the numerous means which tax authorities are employing to recover tax revenue on the estimated US$6trillion of undeclared money located in a variety of onshore and offshore centres worldwide.
The impact of the Liechtenstein tax affair has also had repercussions further abroad, which has since seen 13 countries, from Italy to Brazil, launch investigations into their own high-net-worth citizens suspected of using Liechtenstein as a tax haven.
The case has also had serious repercussions for the principality, with German Chancellor Angela Merkel threatening to block Liechtenstein's entry into the European Union's border-free Schengen zone unless it opens up its banking system.
The full scale of the Liechtenstein tax scandal has yet to emerge, with LGT Bank stating that it will challenge the legality of how the information was acquired.
German authorities have yet to officially charge anyone with tax evasion. Regardless of the outcome, many tax experts say that German tax authorities have already met their objective.
Philip Marcovici, partner at Baker & McKenzie Zurich, said: 'You have to recognise that even if there is a problem with the information and the German government can't use it to go after tax payers, they have achieved what they set out to do, which is to make the message clear: laws have to be complied with. A key objective was clearly to scare people into reporting their offshore earnings.'
