Forgive me for being perhaps somewhat extreme, but had the ghosts of the Gestapo returned from Hell to Germany this week they might have felt right at home.
Over a 125 police raids were launched night and day on the private homes and offices of a reportedly one thousand or more German citizens, many of them well kown names.
The cause of this extreme police action? Alleged tax evasion!
It seems the German secret police agency, the Federal Intelligence Service (BND), (the equivalent of the U.S. Central Intelligence Agency), paid a €5 million, (US$7.3 million) bribe to a disgruntled employee of LGT Bank in Liechtenstein. (Liechtensteinische Landesbank (LLB) also announced that it too had been the victim of a major data theft).
In violation of Liechtenstein's bank secrecy and criminal laws, the well paid informant sold the BND a compact disk alleged to contain the names of German citizens with accounts at the bank. The payment was authorized by German Finance Minister Peer Steinbrück. (Can you feature the U.S. Secretary of the Treasury bribing a bank employee in England to turn over a list of American clients? -- Sadly, the answer probably is "yes.")
Based on the subsequent statements of German Chancellor Angela Merkle and her ministers that authorized this unprecedented bribe, the official policy is that any German who has a bank account in Liechtenstein is, ipso facto, judged guilty of tax evasion -- due process be damned.
Merkle, head of a shaky coalition government, threatened Liechtenstein with isolation in Europe unless the Alpine tax haven eased its strict bank secrecy. Ms. Merkel, speaking in Berlin after a meeting with Otmar Hasler, Liechtenstein’s prime minister, accused the principality’s banks of “encouraging lawbreaking” in Germany by offering services allowing tax evasion. She did not address whether bribery by the BND is lawbreaking.
Alleged Billions
As is the custom with the public relations bureacrats at the U.S. Internal Reveneu Service, German tax officials immediately began making grandious claims of lost taxes, claiming that Berlin may have been shorted up to €4 billion (US$5.9 billion) in taxes. The German Tax Union, a leftist tax advocacy group, claimed that Germany loses €30 billion (US$43.8 billion) a year to tax evasion. No proof of these numbers was offered.
The scandal is extending far beyond Germany’s moneyed elite, inflaming the prejudices that the left has stirred up among ordinary Germans against too well-paid corporate bosses and the free market in general.
As you might imagine, the story has become one of the biggest scandals in recent German history. The first to fall was the head of the German postal service, Deutsche Post CEO, Klaus Zumwinkel. He resigned last week after raids on his home and office. With television cameras in tow, the tax police arrived at his villa in an affluent suburb of Cologne and carted away boxes of documents.
Liechtenstein Reacts
Notwithstanding that the tiny Principality of Liechtenstein (population 35,000) was up against the Federal Republic of Germany (pop. 82.4 million), Crown Prince Alois von und zu Liechtenstein criticized German authorities, calling its intelligence methods and bribes an "attack" on the principality. "Germany has clearly failed to understand how one behaves toward a friendly state,'' Alois said at the briefing broadcast on television. "Germany won't solve the problems of its tax system with this attack on Liechtenstein,'' he added.
"Germany should use its tax revenue to get its tax system under control rather than spend millions on data which are of doubtful legal standing," the prince told the news conference. He cited a study he said rated Germany's tax system the worst in the world. He might also have added that the welfare state high tax system of Germany encourages legal tax avoidance and, no doubt, illegal tax evasion as well. German income tax rates can confiscate as much as 50% of a person's annual income.
"If media reports are to be believed, German authorities paid a criminal to obtain stolen data,'' Alois said. "We reject this action." Alois praised the laws Liechtenstein has passed since 2000 to enhance transparency and combat money laundering. Still, he said, the country won't surrender its policy of strict bank secrecy and would continue to welcome German investors.
More to Come
Liechtenstein is one of three countries that remain on a bogus black list of allegedly "uncooperative tax havens" published by the left-leaning, Paris-based Organization for Economic Cooperation and Development (OECD). Monaco and Andorra are the other two nations on the OECD hit list. But Liechtenstein is not without poweful resources. At the end of 2006, 15 banks in Liechtenstein administered client assets worth about €99 billion (US$146.5 billion).
Liechtenstein offers a tax free business environment. After Liechtenstein came under criticism in 2000, it adopted a tough anti-money laudering law and also signed a mutual legal assiatnce treaty (MLAT) with the United States. It twice has been praised after reviews by the International Monetary Fund for the integrity of its financial institutions. Unlike the U.S. or Germany, both Switzerland and Liechtenstein, (which are joined in a currency and customs union), have very strict bank secrecy. This is part of Liechtenstein's "basic attitude and tradition," as the country's web site states. Financial institutions in Liechtenstein strictly reject all requests for account information from German or any other tax investigators, but they do cooperate in tax fraud investigations.
Lichtenstein also honors the EU savings tax agreement and, as does Switzerland, Liechtenstein co-operates with the EU on the withholding of taxation of interest income on EU citizens, while preserving bank secrecy. The investigation of corruption at the major German company, Siemens, was initiated in Liechtenstein when a bank there submitted a suspicious activity report in accordance with its Due Diligence Act.
A Wider Goal
For more than a decade the political left in Europe and the U.S. have conducted a media war against all tax havens, especially against Liechtenstein, which has steadfastly refused to alter its financial privacy laws. Now the drumbeat has begun again, using the current German tax investigation as the latest excuse to destroy tax havens and with them, all financial privacy. (Previous specious anti-tax haven reasons have included the failed war against drugs and the ever expanding war against terrorism).
"Excessive bank secrecy rules and a failure to exchange information on foreign tax evaders are relics of a different time and have no role to play in the relations between democratic societies," claimed OECD Secretary-General Angel Gurria in a hastily issued e-mailed statement. (Gurrisa himself has been under investigation for misuse of OECD funds).
Thomas Oppermann, a senior parliamentarian with the ruling center-left Social Democrats (SPD), made the preposturous claim that tax havens like Liechtenstein have "no place" in Europe. German Finance Minister Peer Steinbrueck, who authorized the million dollar bribe, said he will explore whether European measures to "break up" tax havens are necessary. Some Euopean leaders were reported to be hoping for a Democrat take over in the 2008 presidential elections so they can gain allies for restrictions on all tax havens which the Bush administration has opposed.
So, dear readers, get ready for another skirmish in the unceasing left-wing attack on financial freedom and privacy. We'll be right there on the front lines reporting.
* I am the author of a comprehensive work, The Liechtenstein Report, that explains the many legal advantages of banking and asset protection in Liechtenstein. Click here for more information LINK: http://web-purchases.com/190SLIEC/W190H719/
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