Liechtenstein

The Principality of Liechtenstein is one of Europe’s microstates. The area of the country is 160 sq. km (the area of Kyiv is 836 sq. km), its population is about 35,000 inhabitants (the population of the Kyiv’s smallest district, Pechersky, is 132,000). The country’s government, as the official definition puts it, is a constitutional, hereditary monarchy based on democratic and parliamentary principles. The standard of life is one of the highest in the world.

Tax heaven
Liechtenstein ’s laws protecting bank secrecy are among the strictest ones in the world. This is why it was for a long time that a good number of wealthy Europeans were keeping their money over there, while evading taxes. In 2000, the Principality found itself in the list of countries that were defined by the Organization for Economic Cooperation and Development (ОЕСР) as “tax heavens,” and in 2002 it even happened to get into the ‘black list’ of the jurisdictions that were classified by the OECD as being “non-cooperative tax havens.”

However, it was a scandal that exploded in the beginning of 2008 that did make the Principality revise its position. A German prosecutor’s office and intelligence services of Germany bought a disk stolen from the LGT Bank, from where they learned about hundreds of Germans and other Europeans who channeled their quite large sums of money into the bank, but forgot to report about the latter to their tax authorities. To add to the ignominy, the LGT Bank has been owned by the princely family of Lichtenstein. What a disgrace it was! So they in Liechtenstein did come to their senses by undertaking the commitment to abide by OECD standards in regard to transparency and information sharing, and as a result the country was removed from the ‘black list.’ In pursuance of the promise so made, the Principality has already signed the agreements with the US and the UK that would provide for the revelation of non-declared and tax-evaded bank savings.

With this article, we conclude the series of more detailed reports about each of the four countries of the European Free Trade Association (EFTA), with which Ukraine has recently started the negotiations towards a free trade agreement. Read “Liechtenstein” in our IN DEPTH section.

The Princely House
The Princes of Liechtenstein is one of the oldest noble Austrian families. The Hugo Liechtenstein was mentioned in documents for the first time in the year 1136. The family name was derived from the name of a castle not far from Vienna.

At present the state is reigned by Prince Hans-Adam II von und zu Liechtenstein – the 15 ^th prince of the house and the first one to be born and brought up in the principality.

Despite the dainty geographic location, Liechtenstein has been an independent state for over 200 years now.

Liechtenstein as a large trading country
In spite of its tiny size and scarce natural resources, Liechtenstein is one of just a few countries in the world that have more registered businesses – almost 74,000 – than citizens. Taxes from such companies account for some 30 per cent of country’s budget proceeds. Thanks to relatively low tax rates and simple rules for setting up a business and managing it, Liechtenstein developed a successful, liberal and predominantly export-oriented economy with the developed industry based on advanced technologies and the powerful sector of financial services.

The volume of merchandise exports from the Principality is almost twice larger as that of imports. The main items of exports are precision instruments, electronics, postage stamps and ceramics. The major trading partners are the EU and Switzerland.

However, Liechtenstein maintains some trade with Ukraine, too: in 2008, the merchandise trade between the two countries came to almost USD 4 mln, with the export exceeding the import 10-fold.