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Tax evasion: Germany-Liechtenstein 2008

start 14.02.2010

Background

Tax/Liechtenstein/Switzerland

Liechtenstein

Up to the 1950s, the 35,000 inhabitants of the dwarf state of Liechtenstein were not exactly well off. This changed when the princely family had the idea of turning the principality into an investment paradise (a safe haven) for money from all countries. Henceforth, the exposure of information on bank customer accounts would have been lethal to the life-blood of the now flourishing Liechtenstein economy.

The information market

During the period 2002 - 2007 there were a number of cases of data theft from Liechtenstein banks. The aims were to blackmail bank customers in Germany. In some cases the perpetrators were caught and sentenced. In other cases the bank paid money to get the data back.
Around the beginning of 2006 an informant approached the german foreign intelligence service (BND). He offered a DVD with data from Liechtenstein on a large number of german tax evaders. In the course of that year several meetings were held with the informant, with participation of german tax investigators. The informant provided samples so that the data quality could be judged. The DVD was bought by the BND for €5 million.
This kicked off the biggest post-war finance skandal. The question of the legality of purchasing illegaly derived information was debated at length. Banks involved in Liechtenstein were the Liechtenstein State Bank (LLB) and the princely Bank (LGT). Investigations were started against some 1000 suspected tax evaders. The total sum was estimated (somewhat coarsely) between €300 million and €4 billion.
Prospective penalties: a recent principal judgement of the federal surpreme court (BGH) foresees a jail term for an evasion sum upward of €1 million, and a money fine for evasion below €100,000.

A prominent "victim"

One of those under investigation was the chairman of the board of the Deutsche Post, Klaus Zumwinkel. Up to 2006 he had deposited €12 million in the Liechtenstein "Devotion Family Foundation". He refrained from informing the german tax office of the €1.2 million returns. This level would have meant a jail term without parole.
"As luck would have it", a judge involved in the case happened to formulate a liability-dependent resolution just 12 hours too late for Zumwinkel to be liable for a one Million evasion sum. This 12 hours delay saved Zumwinkel from a jail sentence. Within the liability span exactly five years and zero hours, Zumwinkel had evaded only €917.363. The trial was over within two days. The sentence was: two years on parole, and a fine of one million Euro.

For the last two months of his engagement with the Deutsche Post Zumwinkel received €714,000. This included a bonus of €480,000. In that year, no other member of the board was paid a bonus. He let his pension claims of €20 million be paid out as a lump sum.

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Sources [german]:

[1] Der Spiegel "BND zahlte fünf Millionen für geheime Steuerdaten", 16.02.2008
[2] Wirtschaftswoche "Steueraffäre Liechtenstein: Das Fürstentum schlägt zurück", 19.02.2008
[3] Die Welt "Zumwinkel gesteht reumütig Steuerhinterziehung", 22.01.2009
[4] Der Spiegel "Bewährung für ein gescheitertes Vorbild", 26.01.2009
[4] Süddeutsche Zeitung "Klaus Zumwinkel: 20 Millionen Euro Pension", 13.03.2009



 

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