Ethics and governance in the European Financial centers

The growing tension between Liechtenstein and Germany over tax evasion has highlighted the difficulty large countries have in keeping wealthy people from parking money in tax havens provided by smaller states and territories.

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Sen. Carl Levin is opening an investigation into whether U.S. citizens are hiding assets in banks in Liechtenstein to evade taxes after a German probe found widespread abuse.

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19/02/2008 - Disclosures concerning alleged widespread tax evasion by German citizens through Liechtenstein highlight a much broader challenge in today's globalised economy: how to respond to countries and territories that seek to profit from tax dodging by residents of other jurisdictions.


"This is a fundamental issue in our increasingly interdependent world," OECD Secretary-General Angel Gurría commented.


OECD countries and a number of co-operative financial centres have been working together for a number of years to address the problems posed by anti-competitive tax practices, both in OECD countries and offshore, by developing standards of transparency and exchange of information in tax matters that balance the interests of financial privacy with the need for countries to be able to enforce their own tax laws.

Despite these efforts, however, a few jurisdictions still fall short of best-practice standards, effectively providing a basis for illegal tax evasion on the part of some of their customers.


In 2002, OECD published a list of un-cooperative tax havens, initially including seven countries. Several have now made commitments to work with OECD and its partners to improve transparency. But three remain on the list: Andorra, Monaco and Liechtenstein.


"As long as there are financial centres that refuse to co-operate in bilateral tax information exchange and that fail to meet international transparency standards, residents in other countries will continue to be tempted to continue to evade their tax obligations," Mr. Gurría commented.


"The openness of the global economy can only be sustained if participants assume mutual responsibilities, as well as sharing benefits. Excessive bank secrecy rules and a failure to exchange information on foreign tax evaders are relics of a different time and have no role to play in the relations between democratic societies," he stated.


For further information, please contact Nicholas Bray, OECD's Media Division (tel. 33 1 4524 8090).

Source : OECD