Global tax shift seen in IRS' Liechtenstein action

By Kevin Drawbaugh

WASHINGTON (Reuters) - A senior U.S. senator on Tuesday said governments worldwide are getting tougher on tax evaders as American authorities joined other nations in taking aggressive action in a widening case involving Liechtenstein.

The tiny European tax haven is at the center of a scandal that prompted the U.S. Internal Revenue Service to announce it was "initiating enforcement action" involving more than 100 U.S. taxpayers with Liechtenstein bank accounts.

Citing recent "revelations that Liechtenstein accounts are being used for tax avoidance and evasion," IRS Acting Commissioner Linda Stiff issued a warning.

"Anyone with hidden income and gains would be well-advised to make a prompt and complete disclosure," she said.

Similar statements have been made in recent days by tax authorities in Germany, France, Australia, Canada, New Zealand, Sweden, Italy, the Netherlands and Britain.

"We are witnessing a worldwide rejection of tax haven abuses and a new level of international cooperation to stop tax havens from facilitating tax dodging by the wealthy and powerful," said Sen. Carl Levin, the chairman of the U.S. Senate's Permanent Subcommittee on Investigations.

The Michigan Democrat said tax authorities have "announced their intent to investigate tax dodging by persons with accounts at Liechtenstein's LGT Bank."

The quiet mountain enclave of Liechtenstein -- landlocked between Austria and Switzerland -- is smaller than the District of Columbia and has a population of only 35,000 residents.

But its secretive tax system has attracted funds from around the world, landing it on an Organization for Economic Cooperation and Development (OECD) blacklist for failing to comply with global information-sharing rules.

The OECD has long urged Liechtenstein to turn on the lights in its vaults, which hold $147 billion in client assets.

A spokeswoman for the principality declined to comment on Tuesday on the growing list of investigations.

German prosecutors have led the way in the latest probes. They said on Tuesday they were expanding their investigation to a second, unnamed bank, having already searched the properties of about 150 suspected tax dodgers in a sweep focused on LGT.

A private banking group controlled by Liechtenstein's billionaire royal family, LGT said in a statement on its Web site on Sunday that bank data likely stolen by a former employee had been illegally disclosed to German authorities.

Levin said there are about 50 tax havens worldwide that have effectively "declared war on honest taxpayers."

He said, "In the United States alone, offshore tax evasion produces an estimated $100 billion in unpaid taxes each year.