Forgotten World (126): Liechtenstein
It’s time for another week of postings in my long-running series called Forgotten World – a look at parts of the world that hardly feature in our media or thoughts. You can check the previous 125 entries here.
The Principality of Liechtenstein is one of the most bizarre and disturbing features of the European landscape. It is a tiny, landlocked country tucked away between Switzerland and Austria with mountain slopes rising above the Rhine valley. The geographical area is only 160 sq km (61.8 sq miles) and the population a mere 35,100. Liechtenstein is Europe’s only absolute monarchy with Prince Hans-Adam having the power to hire and fire the government.
Much of the country’s wealth is based on its status as a low tax haven. Around 75,000 companies have their nominal “letter box” offices in Liechtenstein where business tax rates are very favourable. This status came under the spotlight in 2000 when two international reports criticised Liechtenstein for lax financial controls. The reports said that the Liechtenstein banking system enabled gangs from Russia, Italy and Colombia to launder money from their criminal activities. Stung by the criticism, Liechtenstein reformed its laws, so that customers opening bank accounts may now no longer remain anonymous.
However, in 2007 Liechtenstein remained on the blacklist of uncooperative tax havens maintained by the Organisation for Economic Co-operation and Development (OECD). Early in 2008, the country attacked the authorities in Berlin for buying information on German businessmen clients that have bank accounts in the principality. Germany has launched a tax evasion investigation using the data which was supplied by an anonymous informant who was reportedly paid 5m Euros (£3.75m; $7.3m).