Sunday, April 27, 2008

Liechtenstein foundations become less atractive with secrecy breach

Modern private foundations (Stiftungs) are a
creation of Liechtenstein, a small Principality
nestled between two neutral countries of
Switzerland and Austria. Along with the
Establishement (Anstalt), Liechtenstein provides
structures which are used to hold assets in bank
accounts protected by legal confidentiality.

Early 2008 has shaken the confidence of the
confidentiality in Liechtenstein with the sale by
two bank officials of the names of bank account
holders to taxx authorities of Germany, Spain,
Portugal and - according to Der Spiegel - even
the U.S. http://www.spiegel.de/international/business/0,1518,537640,00.html

Former LGT-Liechtenstein Landesbank bank official
Heinrich Kieber
<http://www.spiegel.de/international/business//international/business/0,1518,535768,00.html>sold
a DVDs to the German Financial Intellegence
agents for close to €5 million ($7.4
million). Spanish investigators were after
Kieber for a 1996 fraudulent real estate deal in
Barcelona, which had earned Kieber 600,000 Swiss
francs ($553,000). He apparently fled to
Argentina before returning to Liechtenstein,
where he began working for LGT Bank in April
2001. More than half of the investors and about
3,100 foundations and establishments on the DVDs
are from abroad. Some are part of organized crime
in the Balkans and in Russia, including both
well-known and relatively unknown companies.

Unlike in Germany, where foundations serve a
specific not-for-profit purpose , the law in
Liechtenstein and Panama allows the founders of a
foundation to benefit themselves and their
dependents. Tax rates for foundations in
Liechtenstein are also very low and are exempt
from property, earned income and profit taxes.
Only an annual capital tax needs to be paid,
which amounts to 0.1 percent of the paid capital
or 1,000 Swiss francs (620 euro/$904), whichever
is greater. For capital valued between 2 million
Swiss francs and 10 million Swiss francs, the tax
rate is 0.075 percent. Capital valued above 10
million Swiss francs is taxed at a rate of 0.05
percent. Liechtenstein foundations are
available for US$3,000, while Panama Foundations
are available for US$950 and not taxed on income
from non-Panama activities (including interest from Panama bank accounts).

German tax authorities have no problem with
interest made in Liechtenstein as long as it is
declared in tax filings. To keep the money hidden
from German financial officials , according to
the DSTG, many people start foundations using a
name that doesn't identify the founder and
entrust the foundation's management to a trustee.
According to DSTG estimates, within
Liechtenstein's 160 sq km, there are roughly
80,000 letterbox companies , many of which share
an official address with many foundations. To
hide even more tracks from the tax investigators,
the foundation's capital can be deposited in a Swiss bank account.

Switzerland and especially Liechtenstein have
very strict bank secrecy . This is supposedly
part of Liechtenstein's "basic attitude and
tradition," as the country's Web site says.
Financial institutions in Liechtenstein strictly
reject all requests for account information even
from German tax investigators.

It remains to be seen how long secrecy
last. Just before the Kieber debacle, the
Liechtenstein government announced
<http://www.liechtenstein.li/en/eliechtenstein_main_sites/portal_fuerstentum_liechtenstein/fl-staat-staat/fl-staat-aussenpolitik/fl-staat-aussenpolitik-aktuell/fl-staat-aussenpolitik-aktuell-presse.htm?&show=15&pmid=94536>amendements
to the foundation law to be circulated for consultations.


RELATED SPIEGEL ONLINE LINKS

*

<http://www.spiegel.de/international/business//fotostrecke/0,5538,29291,00.html>Photo
Gallery: Cloak and Dagger Dealings in the
<http://www.spiegel.de/international/business//fotostrecke/0,5538,29291,00.html>Alps

*

<http://www.spiegel.de/international/business//international/germany/0,1518,537139,00.html>The
World From Berlin: 'The Tax Scandal Has Reached a New Level' (02/22/2008)

*

<http://www.spiegel.de/international/business//international/business/0,1518,536777,00.html>The
Liechtenstein Affair: German Banks Suspected of
Helping Clients Evade Taxes (02/21/2008)

*

<http://www.spiegel.de/international/business//international/europe/0,1518,536299,00.html>The
Mouse That Roared: Liechtenstein Furious at Germany Over Tax Probe (02/19/2008)

*

<http://www.spiegel.de/international/business//international/business/0,1518,535768,00.html>Massive
Tax Evasion Scandal in Germany: The Liechtenstein Connection (02/16/2008)

*

<http://www.spiegel.de/international/europe//international/business/0,1518,535230,00.html>Raid
on Zumwinkel's Home and Office: Authorities
Investigating Deutsche Post CEO for Tax Evasion (02/14/2008)

Liechtenstein bank shares tumble as German
authorities carry out more tax raids

http://www.iht.com/articles/2008/02/18/business/18raidsfw.php .

Liechtenstein agrees to change Foundation law

http://www.liechtenstein.li/en/fl-portal-aktuell?newsid=15879

1 comment:

Ben Wright said...

Mr. Kieber's actions are a token of the information age. In the age of information, the rich, the powerful and the authoritative surprisingly find that they can keep no secrets. Therefore putative secrets become liabilities. What do you think? --Ben http://hack-igations.blogspot.com/2007/12/people-in-authority-sometimes-abuse.html