EU Tax Driven Crackdown On Bank Secrecy

Introduction – A few weeks ago the German National Police acquired a CD containing the names and details of account holders of bank accounts in a Lichtenstein bank owned by the Lichtenstein royal family. The individual who had the CD downloaded it illegally as in criminal hacking and sold it to the Germans. The CD was contraband being the fruit of a crime – theft, hacking, identity theft, money laundering and conspiracy allegations. This is for sure what the Germans would have charged the culprit with if the roles had been reversed.

So in the name of catching tax evaders the Germans gave a thief a few million dollars for stolen bank data violating the laws for a sovereign nation of Lichtenstein and probably even violating Germany's own laws against such practices. However little good it did Lichtenstein. Now to make it worse the Germans sell the data to some other countries and it is said to also give the data away to countries for free. Who knows what they really did or didn’t do? The countries buying or receiving the data the data of course also became complicit in this criminal conspiracy to wipe their feet on the sovereign nation of Lichtenstein. They are also creating clearly a double standard in that they (the governments) are allowed to violate the laws of their own and other nations, but ordinary citizens are not allowed to do so. It probably occurred to them to just put the data in the public domain like publish it on the Internet, which would free the other countries from being complicit in the crimes, but then those Germans affected would have warning.

It is said by Lichtenstein that the data is from the year 2002 only. Of course the tax collectors want to scare people into thinking it is recent data so many people come forward and pay large fines, penalties, etc. It seems to me that when police obtained evidence illegally it was inadmissible as evidence – at least in free democracies.

The Present Push – Now the EU wants to crack down on bank secrecy in Europe so they can get their taxes. The countries leading the charge are Germany, France, Denmark, Finland, Sweden, Italy, Spain, the U.K, and the Netherlands. The prime targets are Lichtenstein, Luxembourg, Monaco, Andorra, Austria, and Switzerland. What was done in the past is there was a EU withholding tax agreement. The banks in these listed bank secrecy countries were required to collect tax on bank interest and send it to the country the person was a national of. This tax is now 20% of the bank interest and will in three years be 33% of the interest paid by the bank. If the account was in the name of a Panama Foundation there was no withholding tax collected since the foundation was a Panamanian judicial person, not a European person natural or unnatural, thus no tax due.

Now the EU wants this taxation to be based on whom the beneficiary owner is of the bank account, which must always be a natural person, thus leading to a widespread opening of bank records to the taxing authorities all over Europe. This is worse than a fishing expedition. This means that whatever little was left of banking privacy in these countries is under attack. It would seem that these countries will have to cut all their EU ties or give in to the demands. Switzerland has some tough choices to make. They can only sell so many Rolexes and chocolate and need their banking. They may go the way of Nassau and the Cayman Islands with massive bank closures as a result of the end of bank secrecy and the banks then moving to other more private jurisdictions.

Discussion – It is doubtful the EU clout will carry into other countries not on the European continent. Switzerland is going to have some hard choices to make in the next few months. We do not know how it will play out. Panama will not be affected, they are not even talking about us and Panama would never give in to such things.

Panama has 20% of its workforce employed in the banks. Add in those involved in corporations, foundation, law firms doing such work and you have another 10% of the work force. Panama is not going to go into catastrophic unemployment to make the EU happy in its tax collection endeavors. If the Germans tried some sort of illegal move in Panama they might have to find a way to get goods in and out of Germany without the Panama Canal but heck that is only a 7,000-mile detour and with the price of fuel being what it is, forget this.

The same could apply to the EU if they got nasty about Panama banking practices and came up with some sort of boycott. The detour to avoid the canal takes a week, fuel is expensive and the goods sit on the water an extra week. This is expensive. Panama is geographically removed from the EU and such pressures from the EU are extremely unlikely.

Guatemala issued a strong rebuke to the Germans about their actions, so forget this happening in Guatemala. We are already seeing a sharp spike in the amount of phone calls coming in from Swiss and other EU country law firms as they prepare to relocate the assets of their clients for more security and privacy, These law firms are also fearful of the future financial state of the banks in countries like Switzerland, Lichtenstein, Luxembourg, Monaco, Andorra, and Austria after the money starts to fly out the door as the new EU legislation gets closer and closer and more clients get more anxious about what is going to happen.

Goodbye Switzerland! Hello Panama and Guatemala!

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