OECD, Liechtenstein and Germany. Is there a place for a synthetic approach?
The tax disclosures in Germany affecting the LGT Bank, owned by the Liechtenstein principality, generated many reactions worldwide. I would like to highlight the OECD and the LGT bank responses to this issue.
There is a clear tension between both individual jurisdictional interests and the perceived global economic interest represented by the OECD. To honour one of my favourite German schools of thought I would suggest to take a dialectic approach.
The main thesis maintained for centuries in all jurisdictions has been that taxation must be a sovereign matter together with the right to protect the privacy of their citizens and its affairs.
This seems to be the Thesis maintained by Liechtenstein and Germany, each one of them claiming jurisdictional rights to tax the income and assets of their citizens (Germany) on one side and to protect the confidential information of any investment made in its jurisdiction (Liechtenstein) on the other side.
The antithesis emerged in a global economy some decades ago, and is currently represented by the OECD and the majority of countries. Taxation, as the global economy itself, must be a matter of international or global policy and the rules must be established at international level to balance the rights and interests of the different jurisdictions, small and large alike. In this context the OECD established a protocol to access bank information for tax purposes. Have the German authorities followed the recommendations in the LGT case?, this will be seen once all the facts have come to the light.
Could the synthesis be to balance the interest of the large economies where industries and services for their residents constitutes the majority of their tax income with the small international jurisdictions with a predominant industry made of investment banks, wealth and treasury management services focused on international business and expatriates?
In this process the efforts made by the OECD to prevent money laundering activities and avoid Harmful Tax Practices is very welcomed and should be continued. Gibraltar and 33 other jurisdictions have already agree to the OECD recommendations.
Great care should be exercise by the OECD in balancing the interests of the largest economies with the small jurisdictions and the rights of every person and corporation to organize their economic affairs freely in a global economy.
