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Liechtenstein, When A Tax Haven Rights Its Ways And Sheds Its Shells

The former capital of letterbox companies has reinvented itself, minus the tax evasion. Liechtensteiners are discretely delighted by Panama's troubles.

Schaan, Liechtenstein
Schaan, Liechtenstein
Sylvain Besson

VADUZ — It was fiscal slaughter, a purge in the name of financial transparency. In five or six years, Liechtenstein saw half of the letterbox companies that made it a tax haven of choice — and of questionable repute — disappear.

"We've gone from 90,000 companies to about 40,000 now," explains Katja Gey, director of the Principality's Office of International Financial Affairs in the capital Vaduz.

The interest in these structures has largely vanished since Liechtenstein gave up on attracting undeclared money. While the Panama Papers are rocking the offshore world, Liechtenstein seems to show us another way.

It's been a largely forced march towards conformity that allows Liechtenstein to look down not only on Panama the straggler, but also on Switzerland, of which it long was a satellite.

For years, the tiny nation wedged between Switzerland and Austria was, with Panama, a specialist in the sale of dummy corporations. With just 3,000 Swiss francs a year ($3,100), a European client — typically a small or medium-sized business owner with a million bucks in undeclared income — could create his Liechtensteiner foundation.

Swiss banks used to order such companies by the dozens via Liechtensteiner fiduciaries, attorneys who could bring companies to life with nothing more than a rubber stamp, and who would sign the balance sheet each year. The state would charge 1,000 francs ($1,040) per company, for a total annual revenue of about 90 million francs ($94 million). The honey pot has largely dried up since then. With the end of bank secrecy, "one third of our clients have gone to Switzerland where foundations had their accounts, one third turned legal, and the tax authorities caught another third," a state employee says.

Those who left dispersed across Malta, Latvia, Cyprus, and of course Panama, a shelter for hardcore "tax evaders" who wanted to continue doing what they'd been doing. "In terms of money laundering and fight against tax evasion, Panama is now where Liechtenstein was many years ago," says Gey. The Principality was itself the target of a massive data leak in 2000 that exposed how offshore finance worked.

The former tax haven now wants to be a good pupil of international fiscal cooperation. And the forced clean-up has angered fiduciaries. Some have lost up to 80% of their customer base. Others survive only thanks to the task of liquidating foundations, which can be extremely arduous when it comes to big families and big money.

This transition will soon come to an end. By 2017, one year before Switzerland, Liechtenstein will start applying the automatic exchange of information. As a member of the European Economic Area, it must abide by European rules and thus create a central register eventually of all beneficiaries of accounts and companies registered there, a measure that Switzerland has yet to contemplate.

Liechtenstein still has ambitions to act as the world's attorney for the wealthy. Only now, it wants to do so with offshore structures that will actually serve their declared purposes, including the protection of family heritage in case of inheritance. "We used to be like a big supermarket, now we're more like a boutique," Gey concludes.

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Influencer Union? The Next Labor Rights Battle May Be For Social Media Creators

With the end of the Hollywood writers and actors strikes, the creator economy is the next frontier for organized labor.

​photograph of a smartphone on a selfie stick

Smartphone on a selfie stick

Steve Gale/Unsplash
David Craig and Stuart Cunningham

Hollywood writers and actors recently proved that they could go toe-to-toe with powerful media conglomerates. After going on strike in the summer of 2023, they secured better pay, more transparency from streaming services and safeguards from having their work exploited or replaced by artificial intelligence.

But the future of entertainment extends well beyond Hollywood. Social media creators – otherwise known as influencers, YouTubers, TikTokers, vloggers and live streamers – entertain and inform a vast portion of the planet.

✉️ You can receive our Bon Vivant selection of fresh reads on international culture, food & travel directly in your inbox. Subscribe here.

For the past decade, we’ve mapped the contours and dimensions of the global social media entertainment industry. Unlike their Hollywood counterparts, these creators struggle to be seen as entertainers worthy of basic labor protections.

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