Germany Reaps 200 Million Euros in Liechtenstein Tax Probe

April 01, 2010, 1:52 AM EDT

By Patrick Donahue

March 31 (Bloomberg) -- The German government has so far raised about 200 million euros ($270 million) in back taxes from secret accounts in Liechtenstein in the two years since it bought stolen bank data to track down tax evaders.

The illicit disk purchased in 2008 from a former employee of the Liechtenstein princely house’s bank, LGT Group, has led to 588 investigations into tax violations, of which about a third have been completed, the government said today in Berlin in response to a parliamentary inquiry by Germany’s opposition Left Party.

Chancellor Angela Merkel’s government said buying stolen information to find funds hidden in uncooperative tax havens is necessary, given the lack of automatic data exchange or legal assistance. Switzerland and Liechtenstein have refused to offer help if information presented has been stolen from banks.

Buying such data “is in these cases the only way to be able to uncover tax evasion through assets in countries not prepared to offer assistance,” the government said in a statement from the Bundestag, Germany’s lower house of parliament.

The issue emerged again last month when German tax authorities in the state of North Rhine-Westphalia bought a CD with data on Swiss bank accounts. That prompted a nationwide dragnet into some 1,100 suspected cases of tax evasion, including unidentified employees of Credit Suisse Group AG.

The state’s Finance Ministry declines to confirm or deny media reports that the disk contained data on accounts held at Zurich-based Credit Suisse.

‘Appropriate’ Payment

Today’s statement said that the 2.5 million euros spent to buy the Swiss data was “appropriate.”

Germany and Switzerland reached a preliminary agreement on a double-taxation treaty last week. Officials from both countries said they would work on taxing existing and future German assets, although Swiss Finance Minister Hans-Rudolf Merz reiterated that his country would refuse legal assistance in stolen-data cases.

The two-year-old probe into Liechtenstein assets began in February 2008 when Germany confirmed it paid as much as 5 million euros for a disk obtained by the BND Federal Intelligence Service. Liechtenstein’s Crown Prince Alois at the time called the German tactics an “attack” on his principality.

Since then, pressure ensuing from the financial crisis has caused Liechtenstein to shed its reputation as a tax haven. The country’s government yesterday approved a series of tax measures, including 11 data-exchange agreements and legal- assistance rules that conform to international standards.

Liechtenstein was removed last year from the Organization for Economic Cooperation and Development’s “gray list” of countries that haven’t complied with global tax standards. The principality, wedged between Switzerland and Austria, had for years been regarded as an uncooperative tax haven.

--Editors: Leon Mangasarian, Andrew Blackman.

To contact the reporter on this story: Patrick Donahue in Berlin at at pdonahue1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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