FT.com / World - Germany to ‘tighten screws’ on tax havens

FT.com / World - Germany to ‘tighten screws’ on tax havens

Germany to ‘tighten screws’ on tax havens
By Bertrand Benoit and Hugh Williamson in Berlin

Published: February 22 2008 21:30 | Last updated: February 22 2008 21:30

Germany plans to “tighten the screws” on Europe’s tax havens, the country’s finance minister vowed on Friday amid a growing global government backlash against financial centres with bank secrecy rules that foster tax evasion.

The warning from Peer Steinbrück marks another escalation of the tensions with Liechtenstein that have flared over a mammoth tax investigation into bank accounts of Germans held at the principality.

Mr Steinbrück said Berlin was considering bilateral measures against Liechtenstein, such as levies on wire transfers to the principality or an obligation for German banks to declare such transfers.

Angela Merkel, the German chancellor, also signalled she would press Monaco to increase co-operation with tax authorities in other countries when meeting Prince Albert, the principality’s ruler, on Wednesday.

Ms Merkel’s diplomatic push comes as a tax investigation of at least 750 suspected tax evaders enters its second week. The probe sprang from documents about German accounts at Liechtenstein’s LGT bank, which the BND intelligence agency bought for €4.2m ($6.2m) in 2006.

Other countries including the US, Finland and Sweden have opened, or are considering opening, investigations.

Ms Merkel, who met Otmar Hasler, prime minister of Liechtenstein, in Berlin this week, will discuss tax evasion next month with president Nicolas Sarkozy of France, which has long pushed for Monaco to open up.

Thomas Steg, spokesman for Ms Merkel, said the chancellor would speak “clear words” and tell the Monegasque monarch to adopt “fair behaviour”.

A spokesman for Mr Steinbrück said Germany was using “constructive dialogue” with Liechtenstein and other tax havens. However, if this did not work then “more unusual, bilateral steps” would be necessary, he added.

He said these steps would not occur before June at the earliest after a meeting on international tax issues at the Paris-based Organisation for Economic Cooperation and Development, which co-ordinates global efforts to reduce tax-haven secrecy. Bilateral steps may be delayed until after the US elections in November, as Washington has played an important role in the OECD action against tax havens, he said.

Berlin has Liechtenstein, Monaco and Andorra in its sights, three countries classified as “unco-operative” by the OECD because they refuse to disclose the bank data of suspected tax evaders to foreign law-enforcement authorities.

Additional reporting by Gerrit Wiesmann in Vaduz and Frances Williams in Geneva
Copyright The Financial Times Limited 2008