Tax havens make concessions as pressure mounts

ZURICH (Reuters) - Black-listed tax havens Andorra and Liechtenstein on Thursday relaxed their strict bank secrecy rules in the face of a global crackdown that looks set to force top offshore centre Switzerland to open up soon.

The moves come as finance ministers from the G20 group of developed and emerging countries prepare to meet in Britain from Friday ahead of a summit in London on April 2 that is expected to seek ways to fight offshore tax evasion.

Other offshore centres, whose banking industries have thrived under privacy laws that have attracted foreign wealth, have also made concessions in recent weeks, as the financial crisis prompts cash-strapped western governments to be more aggressive against tax evaders.

The tiny Alpine principality of Liechtenstein said on Thursday it would comply with international tax and data sharing standards set up by the Organisation for Economic Cooperation and Development (OECD), by-passing neighbouring Switzerland in the quest for more tax transparency.

"I'm quite sure Switzerland will take similar steps in the near future," Crown Prince Alois von und zu Liechtenstein said.

Andorra, a bank secrecy stronghold nestled between France and Spain, said also on Thursday that it was planning to relax bank secrecy to be removed from an OECD blacklist. It planned to pass a law to this end by November.

The OECD list includes Liechtenstein, Andorra and Monaco, but France and Germany want others, including Switzerland, to be added. German Chancellor Angela Merkel said on Thursday she was optimistic tax havens would co-operate if the G20 threatened to blacklist them.

Monaco declined to comment on its plans on tax.

PRESSURE MOUNTS ON SWITZERLAND

Switzerland, the world's biggest offshore banking centre with estimated assets under management of $2 trillion out of a total of $7 trillion, is under pressure from a U.S. tax fraud targeting its number one bank UBS (UBSN.VX)(UBS.N).

Swiss Justice Minister Eveline Widmer-Schlumpf told Swiss television on Thursday the government was working on a review of bank secrecy rules and expected to present its ideas "shortly."

The government has asked a committee of experts to come forward with proposals on more tax cooperation in view of the G20 meeting and will discuss the topic at a meeting on Friday.

Walter Wittmann, an economic professor at the University of Freiburg was quoted by newspaper Blick am Abend as saying that Switzerland would be "guaranteed a place on the black list" if it refused to cooperate.

Any move by Berne will be watched by many wealth management players operating out of offshore financial centres.

A 2008 report by the OECD lists Switzerland, Austria, Luxembourg, Liechtenstein, Panama, Singapore and others as states where it deems bank secrecy rules undesirable.

Liechtenstein, whose banks have seen big withdrawals since Germany obtained data on citizens suspected of dodging tax by parking money there, said its move could be example to others.

"As the current recession requires huge stimulus packages from governments, pressure against tax-haven countries and banking secrecy is increasing," said Nicolas Michellod, an analyst at research and consulting firm Celent.

"This is not a surprise that small countries like Liechtenstein are the first to be under siege," he said.

Other offshore centres have already taken steps to improve tax co-operation. Singapore, a rising financial centre and Switzerland's biggest new rival, agreed to embrace the OECD standards earlier this month.

The island of Jersey signed an agreement with Britain this week aimed at fighting tax evasion.

Belgium, one of three European Union countries that retain bank secrecy, has said it will share tax information in the future.

Austria, another bank secrecy hub, will not go as far as Belgium but is willing to seek ways to cooperate more on tax.

Luxembourg is still defending its privacy rules.

"Banking secrecy is not a synonym for tax haven," Luxembourg Prime Minister Jean-Claude Juncker said. "I couldn't imagine that the EU would agree that Belgium, Austria or Luxembourg would be listed as countries that it would be necessary to sanction."

($1=1.158 Swiss Franc)

(additional reporting by Jason Rhodes, Boris Groendahl and Tamora Vidallet; Editing by Erica Billingham)