Liechtenstein bank data expose Indian tax evaders

The Indian government has received sensitive information from its German counterpart regarding tax evaders, who have channelled money in a tax haven bank in Liechtenstein, a small European country known for hosting such banks, and it is unwilling to make these details public.

It is not known at this point of time whether the information exchanged between the two countries contain details of account holders from India.

It all started in February this year, when a former employee of LGT Bank in Liechtenstein sold data on about 1,400 people to tax authorities across the world. This was followed by investigations by Germany, the US, the UK, Australia, Italy and others. After receiving the stolen data, the German government initiated action against around 600 taxpayers for possible tax evasion. It has reportedly offered to provide data to any country that seeks information.

Subsequently, India’s finance ministry wrote its first letter to German authorities in February 2008 seeking information on Indian account holders and followed it up with another letter in June 2008, the government disclosed in a reply to a Right to Information (RTI) application filed by the Indian-chapter of Transparency International.

When Transparency International asked for copies of correspondence between the two governments and the list of account holders in LGT Bank, the finance ministry replied saying that the exchange of information between India and Germany is covered under Double Taxation Avoidance Agreement (DTAA), which prohibits countries from sharing information.

“It’s not acceptable that the government is not disclosing the correspondence with the German government,” said Anupama Jha, executive director of Transparency International India.

In an e-mail response to a questionnaire sent to them, LGT Group said Indian authorities have not contacted them so far. “Due to client confidentiality laws, we are unable to disclose any client names. Also, with regard to stolen client data, we do not provide any nationality break-downs”, LGT spokesperson Christof Buri said. The German government did not respond to the questionnaire.

If the German government had given details of Indian account holders in LGT Bank, which is owned by the princely house of Liechtenstein, it will help domestic tax authorities to investigate tax evasion for money deposited in tax haven destinations. Tax haven locations thrive mainly because of difference in tax rates, often levying nil or very low taxation. Banks that operate in these locations are alleged to create complex offshore structures that will enable their clients to hide the assets from tax authorities.

This sort of tax evasion, according to a report prepared by the US senate sub-committee last month, had estimated that it cost US taxpayers $100 billion every year. LGT Group was one of the two entities named in the report.

But LGT denied the charges, saying, “Liechtenstein has very strict money laundering and KYC (Know Your Customer) regulations in place, and clients of LGT Group (as of any other Liechtenstein bank) are obliged to disclose the beneficial owner and have to give detailed information regarding the source of their assets”. But it said LGT is neither responsible for nor in control of the tax compliance of its customers.

LGT Group is a wealth and asset management group with or $91.5 billion of assets under its management.