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Nosemonkey's EUtopia

In search of a European identity

Better off out?

After the news that non-EU European country Iceland has been looking in to the possibility of joining the Eurozone, another example of how just because you’re not a member of the EU it’s still likely to have a major impact, courtesy of Liechtenstein.

This particular example, however, is somewhat more timely, following Kosovo’s independence. Because Liechtenstein is one of Europe’s smallest countries, with a population of just 35,000 (compared to Kosovo’s 2 million) – yet has a very healthy economy indeed. For why? Well, like any sensible mini-state (see, for example, Monaco, Andorra and semi-states the Isle of Man and the Channel Islands), it’s become a tax haven – one of the best possible ways for a tiny country to lure in vast amounts of cash. (Supposedly Liechtenstein has more registered companies than people.)

But wait – hold up Kosovo! Before you get all excited about the possibility of becoming the Liechtenstein of the Balkans, be warned…

Because tax havens occasionally end up having problems – such as the current German financial scandal. Here, Germany has gained access – through some well-placed payments to known criminals, it would seem – to Liechtenstein’s records in order to hunt down a bunch of German citizens it wants to prosecute for tax evasion.

Liechtenstein is, naturally, not best pleased that the German state has deliberately accessed its confidential commercial and financial files. It’s hard, really, not to sympathise with Crown Prince Alois when he berates Germany for acting illegally (even if he does slip into hyperbole from time to time). Their country, their rules – and their sovereignty should be respected, right?

Well, not if you’re the EU, it would seem – because the European Union is not only backing Germany’s actions, but is now joining in the anti-Liechtenstein rhetoric:

Luxembourg Prime Minister Jean-Claude Juncker said in Berlin Tuesday that Germany’s controversial tax dragnet is likely to put tax evasion on the agenda of the next meeting of the European Union finance ministers.

Juncker, head of the Eurogroup of 15 countries sharing the euro currency, called on Liechtenstein to “plug its existing tax loop holes.”

…German Finance Minister Peer Steinbrueck says Germany will now push for a pan-European solution to tax evasion…

The Organization of Economic Cooperation and Development, a policy forum for industrialized countries, weighed in to identify European tax havens Leichtenstein, Andorra and Monaco as effectively providing a basis for illegal tax evasion.

And so the pressure mounts. Are we about to see a concerted EU-backed effort to force even more sovereign states to abide by EU rules? It rather looks like it – and it’s really nothing new.

Because if you want to trade with the EU, you pretty much have to abide by the EU’s rules and regulations – something to which both Switzerland and Norway can attest, in case you’re thinking that this could only happen to smaller countries. For European countries, with external trade fairly naturally dominated by their near neighbours, doing what the EU says is pretty much the only option – unless you follow the Belarus route and suck up to Russia instead.

Is the EU using its dominance of the European market to bully its non-member neighbours into doing what it wants? Yep – of course it is. It’s acting as would any sensible economic power – it’s trying to ensure that everything runs to its own best advantage. And it will continue to do so, it it’s got any sense.

Which is precisely why the UK is far better off in.

6 Comments

  1. I am pretty sure that the Brits would hate the EU even more if they were outside. For the very reason that EU is in a better position to dictate the rules and britain would feel that even more as it is used to be atleast a part of the ones who shape the rules.

    Ofc there is the talk of anglosphere and such (has little substance in my opinion) but in the end it would boil down to accepting the rules the us and/or the eu lay out.

    In fact i predict in the case if they leave the eu, that the dislike/hatred of the EU will grow proportionally to the time they are outside and the Island mentality will get even more reinforced.

  2. And when is the UK government going to do something about the Isle of Man, Jersey and Guernsey…?

  3. Iam so grateful for this alert information it actually updates me time and again. Am a Rwandase national who did Economics at my undergraduate studies, i would like to understand fully the implications of tax evasion on an economy?I hope to join Revenue authority of Rwanda.I think this will be a great opportunity for me to undesrtand all corners through which taxpayers evade taxes.On another note, am carrying out a research on STRATEGIES TO COMBAT TAX EVASION.I will be more grateful if this information is timely delivered to me

  4. @Jon Worth… when the Isle of Man ceases to have its own government and is ruled by the UK. Our government, our laws – and for money laundering and tax evasion, you should look no further than the City of London.

  5. Of course Liechtenstien (like Iceland & Norway) is part of the EEA, and as such is already semi-attached to the EU (don’t Norwegians refer to their government as fax government, ‘cos they have to follow the EU rules without input?).
    In my own field, pharmaceuticals, Liechtenstein is treated like any EU member state, and I’ll wager that this is true for all other trade rules.

  6. “for money laundering and tax evasion, you should look no further than the City of London”

    I’m sure the FSA and the City of London Police, both of whom take tax evasion and money laundering very seriously indeeed, would be interested to see the evidence you have of these occuring within the City.

    [note: rants about Evil Private Equity Tycoons and Non-Doms are not the same thing as evidence of tax evasion or money laundering]