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Last Updated: Friday, 22 February 2008, 20:49 GMT
Liechtenstein fury at German tax snoop
By Steven Rosenberg
BBC News, Vaduz

Prince Alois addresses media in Vaduz on Tuesday 19 February 2008
Prince Alois denies the tax haven helps the rich break the law
Walking around Liechtenstein for the first time, there are two things that strike me most about this place: manure and money.

The smell of manure - that comes from the farmland that surrounds this rural principality.

The money! Well, you can see that from all the shiny banks and investment firms that jostle for space in the capital, Vaduz.

These are the companies that have made Liechtenstein one of the richest states in Europe.


Liechtenstein also has the reputation of being one of the most secretive tax havens in the world.

Just ask the Organisation for Economic Co-operation and Development.

Home of the Princely House of Liechtenstein, The Castle of Vaduz
From his castle, the prince wields more power than Queen Elizabeth II

This financial watchdog says Liechtenstein is one of only three states left on its blacklist of "uncooperative tax havens" (the others are not a million miles away - Monaco and Andorra).

Liechtenstein this week attacked the authorities in Berlin for buying information on German businessmen clients that have bank accounts in the tiny Alpine 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).

Perhaps the tax evasion scandal explains the hushed silence that accompanies our arrival at our hotel.

Map of Liechtenstein

To reach the lift we have to pass through the hotel restaurant.

As we walk in with all our equipment (TV camera, tripod and cases), the packed dining hall suddenly goes very quiet.

Feeling rather embarrassed, I scurry through as quickly as possible and go up to my room.

Admittedly, the people we meet in Liechtenstein are extremely friendly, even at LGT Group.

It was a former LGT employee who stole data relating to German businessmen in Liechtenstein.

It is thought this could be the same information that was bought up by the German secret service.

We are invited in for a background chat (but not allowed to switch on the camera, for fear of frightening clients).

'Completely unreasonable'

The Crown Prince of Liechtenstein is also welcoming.

I meet 39-year-old Prince Alois up in his 900-year-old castle, perched on a hill above Vaduz.

He may only have 34,247 subjects (that is how small Liechtenstein is), but the prince has more power than the British Queen - for instance, he can sack his government whenever he chooses.

LGT Group HQ in Vaduz
The data was reportedly stolen from LGT group in 2002

He may be powerful. But these days Prince Alois is not amused.

"I would describe the methods used by Germany as completely unreasonable," he tells me, referring to German spies buying up CDs containing confidential data.

I point out that his country stands accused of helping greedy German businessmen stash their money away, keep it hidden from the taxman and break the law.

"Well, we're not helping them," Prince Alois replies. "We just don't ask continuously questions like a nanny: 'Have you paid your taxes every year?' I think this can't be our role."

The Crown Prince believes that the problem is not Liechtenstein - it is Germany's own punitive tax system.

He tells me: "I think the only real long-term solution for Germany is to change their tax system to introduce an easy, simple-to-understand and just tax system.

"I think, then, people are happy to pay."

Prince Alois claims the principality has gone a long way to cleaning up its image as a financial centre.

Berlin, however, remains unconvinced.

As far as the German government is concerned, in Liechtenstein it is not only the manure that smells, but the financial world too.

Row over German tax investigation
19 Feb 08 |  Business
Germany hunts tax haven cheats
18 Feb 08 |  Business
Deutsche Post boss in tax probe
14 Feb 08 |  Business
Country profile: Liechtenstein
30 Nov 07 |  Country profiles

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