Following Lead

Singapore is now following Liechtenstein’s lead, and will make laundering of profits from tax evasion a crime under a law taking effect July 1.

“There are plenty of Europeans -- Germans for example -- who a number of years ago shifted money that was undeclared to Singapore and now have a major problem given the rules that are coming into effect this July,” Philip Marcovici, an independent Hong Kong-based tax lawyer and board member of Vaduz-based wealth adviser Kaiser Partner Group, said in a telephone interview.

Governments are hoping for a piece of what the European Commission estimates is 1 trillion euros ($1.3 trillion) of lost tax revenue as many nations struggle to narrow budget deficits. In April, the European Union moved closer to an agreement that would clamp down on tax evasion by sharing bank details across borders, as Luxembourg and Austria became the last countries in the 27-nation region to give up blocking the efforts.

Luxembourg Prime Minister Jean-Claude Juncker also said the country would end its bank secrecy policy in 2015.

U.S. Efforts

Countries are also responding to the implementation of the U.S. anti-tax-evasion law, the Foreign Account Tax Compliance Act, or Fatca, which took effect Jan. 1. The legislation requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients.

More than a decade ago, Liechtenstein and 34 other countries were branded by the Organization for Economic Cooperation and Development as being uncooperative tax havens. Faced with a need for revenue following the 2008 global financial crisis, governments of the major economic powers were no longer comfortable with the kind of hands-off banking provided by the principality and began to demand transparency, said Katja Gey, director of Liechtenstein’s Office for Financial Affairs.

Financial Crisis

Yielding to the pressure in 2009, the country eliminated its banking secrecy laws. The 2008 financial crisis had further damaged Liechtenstein’s economy, cutting assets under management at the principality’s banks from 171 billion Swiss francs ($141 billion) in 2007 to 117 billion francs ($125 billion) in 2011, according to the Liechtenstein Bankers Association.