Liechtenstein Prime Minister Klaus Tschütscher (pictured) and Stephen Timms, Financial Secretary to the UK Treasury, signed a tax information exchange agreement (TIEA) on August 11. The two countries agreed on a joint model for cross-border cooperation to ensure a due process for past and future tax claims.
"This agreement sets out a pragmatic path that includes in a cooperative way all parties involved: clients, financial intermediaries and both governments," said Tschütscher. "Where the effectiveness of international cooperation in tax matters through OECD standard solutions reaches a limit, we pursued a tailor-made approach. One that ensures legal certainty and helps bridging the individual interests involved," he added.
The TIEA provides for particularly favorable conditions for the self-declaration of clients with tax arrears in the UK. Compared with the UK's recently announced New Disclosure Opportunity for taxpayers, the conditions in the agreement with Liechtenstein include a reduced period for assessing outstanding tax claims and the option of flat-rate taxation. The program will run from 2010 to 2015, and is available to new and existing clients. Under the text of the agreement, British and Liechtenstein authorities will work together to provide guidance on the tax treatment of customers of Liechtenstein financial intermediaries.
"With this agreement we are creating a stable and reliable regulatory framework and for the client the possibility to make use of an attractive option," said Tschütscher.
In a statement, the Liechtenstein government underscored that within the framework laid down by the agreement, the UK will not in any way seek to restrict or discriminate against Liechtenstein's financial services or its economy. It further noted that following the conclusion of the TIEA, the two countries are to negotiate an additional treaty for the avoidance of double taxation. "This meets a central demand of the Liechtenstein government to strengthen the international market access of our industry," Tschütscher explained.
In June 2008, Liechtenstein had already offered EU states the OECD standard on international cooperation in tax matters within the framework of bilateral agreements. On March 12, 2009, the Liechtenstein government expanded this offer and recognized the OECD standard as a binding global standard. Since then, a TIEA has been concluded with the United States, and another has been initialed with Germany.
Lauding the agreement, and its self-declaration provisions, Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration, said:
“The announcement shows that the era of bank secrecy as a shield for tax evaders is coming to an end. This confirms Liechtenstein’s willingness to position itself as a legitimate financial center which is prepared to compete on the basis of the services that it provides."
"It also shows that OECD countries are increasingly recognizing the benefits, in this changing environment, of voluntary compliance strategies that encourage taxpayers to come forward and declare income and assets held offshore. I am particularly pleased about the innovative and co-operative design of this joint UK-Liechtenstein initiative which may well serve as a model for other countries," Owens concluded.
"This agreement sets out a pragmatic path that includes in a cooperative way all parties involved: clients, financial intermediaries and both governments," said Tschütscher. "Where the effectiveness of international cooperation in tax matters through OECD standard solutions reaches a limit, we pursued a tailor-made approach. One that ensures legal certainty and helps bridging the individual interests involved," he added.
The TIEA provides for particularly favorable conditions for the self-declaration of clients with tax arrears in the UK. Compared with the UK's recently announced New Disclosure Opportunity for taxpayers, the conditions in the agreement with Liechtenstein include a reduced period for assessing outstanding tax claims and the option of flat-rate taxation. The program will run from 2010 to 2015, and is available to new and existing clients. Under the text of the agreement, British and Liechtenstein authorities will work together to provide guidance on the tax treatment of customers of Liechtenstein financial intermediaries.
"With this agreement we are creating a stable and reliable regulatory framework and for the client the possibility to make use of an attractive option," said Tschütscher.
In a statement, the Liechtenstein government underscored that within the framework laid down by the agreement, the UK will not in any way seek to restrict or discriminate against Liechtenstein's financial services or its economy. It further noted that following the conclusion of the TIEA, the two countries are to negotiate an additional treaty for the avoidance of double taxation. "This meets a central demand of the Liechtenstein government to strengthen the international market access of our industry," Tschütscher explained.
In June 2008, Liechtenstein had already offered EU states the OECD standard on international cooperation in tax matters within the framework of bilateral agreements. On March 12, 2009, the Liechtenstein government expanded this offer and recognized the OECD standard as a binding global standard. Since then, a TIEA has been concluded with the United States, and another has been initialed with Germany.
Lauding the agreement, and its self-declaration provisions, Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration, said:
“The announcement shows that the era of bank secrecy as a shield for tax evaders is coming to an end. This confirms Liechtenstein’s willingness to position itself as a legitimate financial center which is prepared to compete on the basis of the services that it provides."
"It also shows that OECD countries are increasingly recognizing the benefits, in this changing environment, of voluntary compliance strategies that encourage taxpayers to come forward and declare income and assets held offshore. I am particularly pleased about the innovative and co-operative design of this joint UK-Liechtenstein initiative which may well serve as a model for other countries," Owens concluded.
