Tax evasion has gotten a new name in the form of Liechtenstein, a popular tax haven since the 1990s. The sixth smallest country in the world and located on a barren mountain top between Switzerland and Austria, it has been termed as a non-cooperative financial centre by OECD.
Tax havens, with bank secrecy laws and low or nil tax rates are popular the world over. Earlier catering to the filthy rich individuals, they now have an increasing clientele from upper middle income groups with the advent of internet banking, credit cards and easy bank transfers. Cash reserves of these banks account for tax evaded income to the tune of billions of dollars each year. Moreover, they are not just pools of vast amounts of ill gotten wealth but probable sources for illegal activities like smuggling, drugs, purchase of firearms and terrorism. Post 9/11 the U.S pressurized the OECD to formulate a new pact including information sharing with other nations, greater transparency and cooperation, which would be signed by the forty-one tax havens that have been identified across the world. Three countries, Monaco, Andorra and Liechtenstein refused to sign it, consequently being termed as non cooperative.
The LGT Bank with 76000 loyal customers and euros 100million in profits has “Invest Like the Prince” as its publicity one liner, and is run by the royal family from the castle known as Vaduz. Earlier known as the island of penury in Europe, Liechtenstein is now a land of plenty and one of the most vibrant financial centres of Europe.
Recently, the German government reportedly paid USD 4.2 million to buy a DVD of database containing the name of tax evaders. Britain and other countries soon followed suit and nailed down some of its tax evaders and recovered about 200 million pounds from various other havens, including Liechtenstein. The German government is willing to part with information regarding Indian holding accounts in the LGT Bank, on a formal request by the Government of India.
However, the government has shown a very lukewarm response towards the offer. The Indian chapter of Transparency International, a prime critic in this issue, is citing political pressure as the prime reason for the lackadaisical attitude and stoic silence of the Centre. It has been estimated that a large number of Indians are clients of the LGT bank given the high proportion of scams they are involved in. A good number of these could be high profile politicians and business men who would lobby against any action by the government.
In this state of connivance and conspiracy, getting names of Indian tax evaders and nailing them in the court of law seems a distant dream. Aggravating the situation are the laws that protect tax havens and require explicit proof of criminality to access any data. If delayed the data, thus, might never be assessed and tax never recovered (which could run into millions of dollars), much to the chagrin of critics and relief of the tax evaders.
It is time the government realizes the losses it is suffering at the hands of the rich high and mighty and take corrective steps, and take a more pro active stance in recovering information about Indians holding bank accounts abroad, primarily Liechtenstein. So, while Indians are still stuck to “Swiss Banks” as the routine, clichéd reference to vast hoards of black money, its time we learn a new name – Liechtenstein!