Liechtenstein trip...with a �1bn bonus
IN his exclusive Recorder column this week East Ham MP Stephen Timms discusses his visit to a country with less than half as many residents as East Ham! He writes: Last month, I paid a ministerial visit to Liechtenstein. Nobody could remember the last t
IN his exclusive Recorder column this week East Ham MP Stephen Timms discusses his visit to a country with less than half as many residents as East Ham!
Last month, I paid a ministerial visit to Liechtenstein. Nobody could remember the last time a British Government minister visited.
It is a tiny country - with fewer than half as many inhabitants as East Ham!
It's in the Alps, tucked alongside the Rhine between the borders of Austria and Switzerland. It has a hereditary prince as head of state - I called on him in his fairy tale castle above the capital, Vaduz. It has a Prime Minister, a Parliament of 25 members, and a police force of 100.
It has its origins in the purchase of the land which now forms the country by the ancestors of the hereditary prince about 300 years ago. It owes its independence to the fact that, 200 years ago, Napoleon liked and respected the then head of the family.
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Though tiny, Liechtenstein has some important companies. I visited the head office of the power tool company, Hilti, for example. And it has some large banks.
The banks were the reason I was there. Until now, it has been impossible for tax authorities to find out anything about money held in a Liechtenstein bank account.
That was ideal for people wanting to evade taxes. But that is all changing. At the G20 summit in Newham in April, the leaders drew up a 'black list' of countries which would not give information to tax authorities; and announced that, to get on the 'white list', countries would have to sign tax information exchange agreements with at least twelve other countries.
A lot of these agreements are now being signed. I signed one in Singapore last month too. Countries are competing to get on the white list fast. It is increasingly clear that the game is up for tax evaders. Liechtenstein - having been among the most unco-operative jurisdictions - has seen the writing on the wall and decided to leapfrog others.
They see that banks regarded as 'pariahs' by other countries will in the future find it increasingly hard to function.
Under a tax information exchange agreement, the tax authority in a country like Britain has to have a good reason for requesting information about a bank account in another country. The UK can't simply ask who has an account there. So, even with an agreement in place, much information may remain hidden.
With Liechtenstein, an additional Memorandum of Agreement goes a step further. Every UK resident with an account in a Liechtenstein bank will have to produce a certificate from Her Majesty's Revenue and Customs, confirming that their tax affairs are in good order.
If they can't produce one within five years, their account will be shut down. That guarantees that accounts in Liechtenstein will all be up to date with tax within five years.
I signed the agreement with the Prime Minister of Liechtenstein in Vaduz. We estimate the UK Exchequer will gain at least a billion pounds as a result. So - as well as a fascinating day - it was a very worthwhile day too.