The Liechtenstein financial center is experiencing a difficult business environment. On the one side, international turbulences on the financial markets are influencing events; on the other side, Liechtenstein is under pressure to adapt due to its liberal economic order and tax policy. In a policy statement before Parliament, Prime Minister Otmar Hasler presented the Government's strategy and set out perspectives for the financial center in the future.
As Prime Minister Otmar Hasler emphasized in his policy statement before Parliament on 20 September, the Principality of Liechtenstein is facing great challenges. When speaking about the future of the Liechtenstein financial center, it must be taking into account that the financial markets are currently undergoing turbulent phases worldwide. Regardless of the current situation, the pressure on Liechtenstein persists to cooperate more strongly in tax matters. According to the Prime Minister's policy statement, the challenges for Liechtenstein consist in its relations with other States and international organizations as well as in the need to carry out domestic reforms to strengthen the business location. Not only the financial center, but also the economy as a whole is experiencing greater competitive pressure.
Liechtenstein is not unprepared for these challenges. Prime Minister Otmar Hasler underscored that the strategy of the Futuro project contains both elements: strengthening competitiveness through domestic reforms, and opening the country to the outside. With the Futuro project, the Government has presented a strategy for the financial center of the future. This active strategy focuses on the protection of privacy as a policy dedicated to a liberal economic order, while offering attractive framework conditions and showing restraint in State interventions, thus creating great incentives for private performance. Within the framework of this Futuro strategy, a number of initiatives are being implemented, as the Prime Minister explained, such as the reform of foundation law and tax law, the "Liechtenstein Business Location" project, the promotion of research and teaching, and the expansion of the National Administration's service-oriented approach with modern eGovernment.
Because of its international orientation, the Liechtenstein financial center also depends on recognition by the international community, Prime Minister Hasler emphasized. This recognition requires cooperation in tax matters. The announced tightening of the EU Savings Tax Directive indicates that the desire for cooperation in tax matters will continue to increase. For this reason, it is also in Liechtenstein's interest to conclude comprehensive agreements to promote legal certainty and trade with Liechtenstein's important economic partners. As the Prime Minister said, "Given that most Western countries are less and less likely to differentiate between common crime and tax offenses, the reputation risk for a strongly integrated State like Liechtenstein is especially great. Particularly as a small and vulnerable State, we are interested in finding overall solutions with interested partners." The Prime Minister is convinced that a strategy with comprehensible negotiating positions will open up new opportunities for the financial center. Only through comprehensive cooperation with other States can Liechtenstein defend its own legitimate interests.
According to the Prime Minister's statement, the negotiations with the United States on information exchange in tax matters are close to completion. Already at the beginning of the negotiations approximately two years ago, the United States made clear that the negotiations were not about a double taxation agreement, but rather only about information exchange according to the OECD standard. For Liechtenstein, the negotiating situation was made difficult by the fact that Liechtenstein had been placed on the "black list" of the Financial Action Task Force (FATF) for a short period at the end of the 1990s and continues to be on the OECD "black list" for tax matters. Since the Liechtenstein financial center is classified as an offshore center, the United States had only extended the QI status for short periods of time. Prime Minister Hasler does not expect the negotiations with the US to lead to automatic information exchange, but rather information will only be exchanged upon specific request, at the level of both mutual legal assistance and administrative assistance. Information exchange will not be limited to offenses covered by Liechtenstein's definition of fraud. However, conclusion of the planned agreement also raises expectations of positive developments in relations with the US: a significant enhancement of the financial center's reputation, an agreement on longer-term QI status, and the beginning of tax cooperation with the US.
According to the Prime Minister's statement, the Anti-Fraud Agreement negotiated with the EU is still being evaluated by EU States. So far, no agreement has been achieved, even though the treaty is based on the EU acquis. Prime Minister Otmar Hasler announced the goal of concluding both negotiations – with the US and with the EU – before the end of the year. The Government also intends to pursue its talks with the OECD on removal of Liechtenstein from the list of non-cooperative states in the field of tax cooperation.
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