Tax haven no more: Liechtenstein turns 300

Published 24.01.2019 00:00
Updated 24.01.2019 13:53

The tiny principality of Liechtenstein at the heart of Europe long had a reputation for dubious banking practices. Following a 2008 scandal, those days are now in the past. As it turns 300, Liechtenstein has carved out a reputation for high-tech industry.

Which country is the geographical size of Manhattan, but has a population of 38,000, rather than 1.6 million? Which country has just one bishop, one tunnel, one outdoor swimming pool, one prison and one McDonald's, but 15 banks?

Answer: Liechtenstein. Based on population, the principality, which lies between Austria and Switzerland, is the sixth-smallest country in the world. Today, it marks its 300th birthday largely ignored by all but its immediate neighbors. A few details suggest people should be paying greater attention.

NOBILITY: The princely family has a considerable say in this microstate, but the 25,000 residents who can call themselves Liechtensteiners have few objections. In 2012, they rejected an initiative to put an end to the prince's right of veto over decisions taken by parliament or plebiscite. They tend to back his arch-conservative political approach. When the prince threatened to veto an easing of the ban on abortions, the electorate rejected it in a 2011 referendum. The Liechtenstein motto says it all: "For God, Prince and Fatherland."

TAX HAVEN: The highest rate of tax is 8 percent, with municipal taxes on top. Alongside the 25,000 Liechtensteiners, 13,000 foreigners have secured the coveted right of residence. Only a couple dozen residence permits are awarded each year. Some 20,000 people - more than half of those employed in the principality - are compelled to live in Switzerland or Austria.

BANKS: The 15 banks with a license in Liechtenstein are involved primarily in asset management. In 2017 they looked after the equivalent of around $300 billion for their clients - almost $8 million per resident. Most of this money is owned by foreign clients. The largest bank, the LGT, belongs to the prince's family.

MONEY LAUNDERING: Liechtenstein was long seen as a tax haven, with obscure foundations providing facilities for foreigners seeking to hide untaxed assets from the tax authorities in their own countries. Confidential client data was then stolen and sold to Germany. The scandal, which broke in 2008, led to the conviction of the head of Deutsche Post, Klaus Zumwinkel, who was compelled to resign. The principality's authorities now insist that the swamp has been drained, and in the autumn of last year the European Union took Liechtenstein off its "grey list" of tax havens that it was monitoring.

INDUSTRY: While the banks contribute 25 percent to gross domestic product, industry is in fact larger. By comparison with population, no country has as many companies: 4,600 - equivalent to one company for every eight residents. They include global brands, such as construction tool company Hilti, audio and video connector company Neutrik and Ivoclar Vivadent, which has two thirds of the global market in ceramic dental crowns.

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