Liechtenstein under EU pressure on taxation

Yesterday I wished for public EU information to be more readily available and specific about the remaining issues regarding the common travel area: Liechtenstein heading for Schengen area (27 December 2010).

In the blog post 'What does the EU want from Liechtenstein?' (25 December 2010) we noticed how central EU aims in tax matters are with regard to the Principality:

Council conclusions on EU relations with EFTA countries; 3060th GENERAL AFFAIRS Council meeting Brussels, 14 December 2010

The General Affairs Council (GAC) dedicated three and a half out of eight paragraphs to issues regarding taxation and relevant to the financial services industry in the Principality of Liechtenstein:

21. With regard to cooperation and information exchange in tax matters and the fight against fraud and tax evasion and any other illegal activity to the detriment of the financial interests of the parties, the Council welcomes the commitments taken by the Principality to implement OECD standards on transparency and on tax information exchange and to fight against fraud, and calls on Liechtenstein to continue its efforts in this area. The Council expects a quick and consistent implementation of these commitments in the relationship between Liechtenstein and the EU and all its Member States.

22. Concerning the taxation of savings, the Council welcomes the openness of Liechtenstein to launch negotiations on a revision of the savings taxation agreement to reflect the evolution of the corresponding EU acquis, once the EU has agreed the final text for its review of the savings taxation directive.

23. Considering that the EFTA Surveillance Authority has taken in recent years several decisions relating to state aid granted by Liechtenstein, the Council reiterates its recommendation of 2008 that Liechtenstein assesses all measures applied to industry, services and trade with respect to the definition of state aid provided for in the EEA Agreement, particularly in finance. The Council welcomes the intention of Liechtenstein to reform its tax legislation and looks forward to a reform compatible with state aid legislation. The Council will closely follow the implementation of this reform.

24. With regard to harmful tax practices, the Council encourages the Principality to continue discussions with the EU on the application of the principles and criteria of the EU Code of Conduct on business taxation.

Taxation and banking

I would have hoped for complementing quality information from the Council about the EU's aims regarding more controversial issues, such as cooperation against fraud and tax evasion, the revision of the savings tax agreement, state aid reform and curtailing harmful tax practices.

The European Union needs to take a more open attitude towards specifying the problems (as it sees them), defining its objectives and publishing reports on progress (or lack of it) in negotiations.

We can also hope for the EU's counterparts, in this case the Principality of Liechtenstein, to present their positions and arguments transparently.


DG Taxation and Customs Union

I have to admit that I found the web pages of the Commission service Taxation and Customs Union disappointing, because they did not offered clear thematic pages, country pages or search options.

The DG seemed to leave visitors only crumbs to pick here and there.

The first option is to go back to the annual report, almost a year old, but offering a background view:

Activities of the European Union (EU) in the tax field in 2009

The very first sentence of the report highlighted the aspirations of the EU with regard to Liechtenstein, and concrete issues concerning the Principality are mentioned in many places in the 30 page report:

Widespread tax evasion through the use of Liechtenstein foundations which came to light at the beginning of 2008 once again demonstrated the importance of international cooperation in the area of savings taxation.

With regard to fresher information, the only option seemed to be to trundle through the press releases published in 2010, but at headline level I found nothing relevant.

For those with a wish for a forward view commissioner Algirdas Šemeta spoke about the Commission Work Programme 2011 (CWP 2011) to the Economic and Monetary Affairs Committee of the European Parliament 30 November 2010.

Among other things, commissioner Šemeta said:

… I am working closely with the forthcoming Hungarian presidency to identify how to progress on the savings directive and on the anti-fraud agreements with third countries.

Third, as you know, I am convinced that we have to maintain our efforts in the fight against harmful tax competition both within the EU and with our international partners. We entered in constructive discussions with Switzerland and Liechtenstein on how to extend the principles of the Code of Conduct to those two "third" but "close" countries. I also plan to discuss the future of the Code of Conduct itself with the Member States during the next meeting of the Tax Policy Group.

Council: Tax policy

The Council offers a web page with links concerning Tax policy (Taxation of Savings Income), with links to Liechtenstein, but I have found no quality overview regarding tax discussions with the Principality.

All in all, the information from the Commission and the Council about taxation pressure on Liechtenstein comes in bits and pieces rather than in a comprehensive and user-friendly manner.



Ralf Grahn



P.S. On Se former à la communication européenne, or a bit easier Lacomeuropéenne, Michael Malherbe dissects the communication activities of the EU institutions as an expert engaged for citizens and consumers. His most recent blog post was a review of European communication in 2010.

Liechtenstein heading for Schengen area

We still do not know if the parliamentary question about EU trade agreements with Liechtenstein is nonsense, but we hope that reasons will be forthcoming if it makes sense: What does the Earl of Dartmouth know about the EU? (26 December 2010).

In this post we look at available information about the entry of Liechtenstein into the Schengen travel area with common external borders.


GAC conclusions

We return to the conclusions from the General Affairs Council (GAC) of the European Union:

Council conclusions on EU relations with EFTA countries; 3060th GENERAL AFFAIRS Council meeting Brussels, 14 December 2010

This is what the GAC had to say about the entry of Liechtenstein into the Schengen area:

20. Preparations for the association of Liechtenstein to the Schengen acquis are well advanced on both sides. The Council is looking forward to a rapid entry of Liechtenstein into the Schengen area.

Nice as such general remarks are, the public would be better served if the Council would be considerate enough to publish a memo on where matters stand and which issues remain open.


Liechtenstein protocol

The Treaties Office Database of the European Commission offers many useful features if you are looking for international agreements. 'By country' we find 67 treaties involving the European Union and Liechtenstein.

Among them we find the Liechtenstein protocol, officially:

Protocol between the European Union, the European Community, the Swiss Confederation and the Principality of Liechtenstein on the accession of the Principality of Liechtenstein to the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis (signed 28 February 2008, but not yet in force)

There is a summary of the contents of the Liechtenstein Schengen protocol, a link to the summary of the Schengen agreement of Switzerland and a link to the text of the Liechtenstein protocol.

Alternatively, you could have used word search 'Schengen' to locate two agreements with Iceland and Norway (1999), the agreement with Switzerland (2004) and the Liechtenstein protocol (2008).


Liechtenstein Schengen procedure

The Liechtenstein accession procedure to Switzerland's Schengen agreement can be followed under NLE/2006/0251 on the Legislative Observatory Oeil of the European Parliament.

After the entry into force of the Lisbon Treaty, a new consultation was launched.

The draft report by the Committee on Civil Liberties, Justice and Home Affairs is heading for the plenary on 14 February 2011. According to Oeil, the draft report is dated 1 December, but the document behind the link is actually dated 18 November 2010:

Draft recommendation on the draft Council Decisions on the conclusion on behalf of the European Union of the Protocol between the European Union, the European Community, the Swiss Confederation and the Principality of Liechtenstein on the accession of the Principality of Liechtenstein to the Agreement between the European Union, the European Community and the Swiss Confederation on the Swiss Confederation's association with the implementation, application and development of the Schengen acquis (06077/2010– C7-0141/2010 – 2006/0251(NLE))


Media

Finding useful information on the Council website or the government of Liechtenstein was not very rewarding, but local media are sometimes more informative than official sources:

Liechtensteiner Vaterland: Liechtenstein wartet auf grünes Licht (7 November 2010)



Ralf Grahn



P.S. Sauvons l'Europe is a pro-European 'progressive' voice for citizens, well worth reading and following.

What does the Earl of Dartmouth know about the EU?

The latest blog entry in the series asked 'What does the EU want from Liechtenstein?' (25 December 2010).

Now we may ask what the Earl of Dartmouth knows about the EU.

On 14 December 2010 William (The Earl of) Dartmouth, member of the European Parliament (MEP), presented a question for a written answer to the Commission (E-010415/2010):

Does the EU have a trade agreement or agreements with Liechtenstein? If so, what is/are the principal terms?

Trade

In the context of the European Union and its common commercial policy, trade is usually understood as relations with third countries. (Cf. Articles 206-207 TFEU)


Liechtenstein

However, Liechtenstein has joined the internal market through the European Economic Area (EEA) together with Iceland and Norway.

In addition to my series of blog posts, the EU relations with Liechtenstein are outlined in the recent GAC conclusions:

Council conclusions on EU relations with EFTA countries; 3060th GENERAL AFFAIRS Council meeting Brussels, 14 December 2010


INTA

The Committee on International Trade (INTA) of the European Parliament is presented as responsible for:

matters relating to the establishment and implementation of the Union's common commercial policy and its external economic relations, in particular:

1.    financial, economic and trade relations with third countries and regional organisations;

2.    measures of technical harmonisation or standardisation in fields covered by instruments of international law;

3.    relations with the relevant international organisations and with organisations promoting regional economic and commercial integration outside the Union;

4.    relations with the WTO, including its parliamentary dimension.
 
The committee liaises with the relevant interparliamentary and ad hoc delegations for the economic and trade aspects of relations with third countries.

The Earl of Dartmouth

William (The Earl of) Dartmouth is a member of the EP Committee on International Trade, where he represents the Europe of Freedom and Democracy (EFD) group, an assortment of nine nationalist parties. He was elected an MEP as a candidate for the United Kingdom Independence Party (UKIP).


The question

I would expect MEPs in general and members of the expert Committee on International Trade in particular to know that Liechtenstein has joined the internal market through the EEA (in 1994).

I would not employ the term 'trade' regarding Liechtenstein in the way we do when speaking about economic relations with third countries (outside the single market).

The international agreements between the European Union and any country are just a few mouseclicks away at the Treaties Office database.

Therefore the parliamentary question about one or more EU trade agreements with Liechtenstein makes me wonder if it is is based on ignorance or laziness, or if there are profound reasons for such a query I have failed to understand.

I hope that William (The Earl of) Dartmouth would be kind enough to explain how his parliamentary question makes sense.



Ralf Grahn

P.S. What a sad Christmas AFP reports from Minsk: Belarussian police launched sweeping raids on opposition homes and offices as part of its crackdown on protests following Alexander Lukashenko's reelection, rights groups said.

What does the EU want from Liechtenstein?

Our latest blog entry on EU-Lichtenstein relations looked at what the web pages of the European External Action Service (EEAS) and the EU delegation to Switzerland and Liechtenstein offer interested citizens: 'EU communication on EEA and EFTA member Liechtenstein' (24 December 2010), with links to earlier blog posts.

We return to the conclusions from the General Affairs Council (GAC) of the European Union:

Council conclusions on EU relations with EFTA countries; 3060th GENERAL AFFAIRS Council meeting Brussels, 14 December 2010


Conclusions specific to Liechtenstein


In this blog entry we present the GAC conclusions specific to Liechtenstein (points 17 to 24):

PRINCIPALITY OF LIECHTENSTEIN

17. Given its limited human resources, the swiftness shown by Liechtenstein in most areas in adopting European Union legislation and regularly updating its legislation in accordance with the evolving EU acquis is to be commended. The Council welcomes the positive report of the government of Liechtenstein published on the occasion of the 15th anniversary of membership in the EEA.

18. In the period 2008 to 2010, relations between the EU and Liechtenstein have substantially intensified and were marked by positive developments in a number of areas.

19. The Council welcomes the solidarity with the EU shown by the people of Liechtenstein when committing to continue and increase their contribution to the reduction of social and economic disparities in the EEA for the period 2009-2014.

20. Preparations for the association of Liechtenstein to the Schengen acquis are well advanced on both sides. The Council is looking forward to a rapid entry of Liechtenstein into the Schengen area.

21. With regard to cooperation and information exchange in tax matters and the fight against fraud and tax evasion and any other illegal activity to the detriment of the financial interests of the parties, the Council welcomes the commitments taken by the Principality to implement OECD standards on transparency and on tax information exchange and to fight against fraud, and calls on Liechtenstein to continue its efforts in this area. The Council expects a quick and consistent implementation of these commitments in the relationship between Liechtenstein and the EU and all its Member States.

22. Concerning the taxation of savings, the Council welcomes the openness of Liechtenstein to launch negotiations on a revision of the savings taxation agreement to reflect the evolution of the corresponding EU acquis, once the EU has agreed the final text for its review of the savings taxation directive.

23. Considering that the EFTA Surveillance Authority has taken in recent years several decisions relating to state aid granted by Liechtenstein, the Council reiterates its recommendation of 2008 that Liechtenstein assesses all measures applied to industry, services and trade with respect to the definition of state aid provided for in the EEA Agreement, particularly in finance. The Council welcomes the intention of Liechtenstein to reform its tax legislation and looks forward to a reform compatible with state aid legislation. The Council will closely follow the implementation of this reform.

24. With regard to harmful tax practices, the Council encourages the Principality to continue discussions with the EU on the application of the principles and criteria of the EU Code of Conduct on business taxation.

Sticking points

I would have hoped for more information on the web pages of the EU delegation (and links on the EEAS country page) about the entry of Liechtenstein into the Schengen area, as well as quality information about the EU's aims regarding more controversial issues, such as cooperation against fraud and tax evasion, the revision of the savings tax agreement, state aid reform and curtailing harmful tax practices.

In questions such as these the European Union needs to take a more open attitude towards specifying the problems (as it sees them), defining its objectives and publishing reports on progress (or lack of it) in negotiations.

We can also hope for the EU's counterparts to present their positions and arguments transparently, in this case the Principality of Liechtenstein.



Ralf Grahn



P.S. The joint statement by EU High Representative Catherine Ashton and US Secretary of State Hillary Clinton on the post-Presidential elections situation in Belarus (23 December 2010) is an important first call for the respect of democratic principles and human rights in Belarus, after the bankruptcy of the policy of 'constructive engagement' with the last dictator of Europe.

EU communication on EEA and EFTA member Liechtenstein

Our first look at Liechtenstein was the blog post 'EU relations with Liechtenstein (general conclusions)' (22 December 2010), presenting the general remarks including Liechtenstein, but addressed at the EEA or EFTA states as a whole. Then we changed to a Liechtensteinian perspective in 'Principality of Liechtenstein views the European Union' (23 December 2010).

This blog entry tries to look at what a European citizen readily finds about the relations with Liechtenstein on the websites of the EU institutions.

In the background we have the conclusions from the General Affairs Council (GAC):

Council conclusions on EU relations with EFTA countries; 3060th GENERAL AFFAIRS Council meeting Brussels, 14 December 2010


EU materials (EEAS)

Naturally we have to test the newly launched European External Action Service (EEAS) and its recently designed web pages. What can we say about the communication efforts?

I am happy to see that the country page for the Principality of Liechtenstein on the European External Action Service (EEAS) website offers a succinct text about relevant topics. It manges to cram a lot of information and even some forward-looking elements into ten short lines, with links to other pages.

The news links have been updated with the GAC conclusions. There are also 'related links' to websites specific to Liechtenstein (relations).

Among the links in the text, one leads to a page on the European Economic Area (EEA), with a basic description and links to the latest news.

Another text link leads to a fairly comprehensive summary about the Schengen area and cooperation, but not updated since 3 August 2009.

There is also a link to the 2004 agreement with Liechtenstein on taxation of savings.


Liechtenstein treaties

The EU Treaties Office database offers 67 treaties between the European Union and Liechtenstein. Regarding Schengen and the free movement of persons some agreements are not yet in force.


EU delegation to Switzerland and Liechtenstein

Although general news on the front page are posted in English, the web page of the EU delegation for Switzerland and Liechtenstein you land on is in German: Delegation für die Schweiz und Liechtenstein.

In addition to German there are pages in French and Italian, but mainly for Switzerland where these are official languages.

You can find a link to the GAC conclusions on relations with the EFTA members, but only if you look for older news (where the language changes to German). I would expect the EU representations to post these conclusions visibly and permanently on the front page in Iceland, Norway and Switzerland-Liechtenstein.

There is a thematic page (in German): Das Fürstentum Liechtenstein und die EU. The page includes a link to the Europe Day celebration speech by the head of government, Dr Klaus Tschütscher, in Vaduz (11 May 2010).

On the Liechtenstein page I would have hoped for more information about how Schengen implementation advances as well as current aims of the European Union and issues in other policy areas.

Ideally, the new text should offer quality information on the issues the GAC conclusions dealt with in general and sometimes vague terms.



Ralf Grahn



P.S. While the EU institutions still seem to be sleepwalking, Jean Quatremer on Coulisses de Bruxelles takes a stand against the actions by the Fidesz government in Hungary to quell free speech and fundamental freedoms.

Prime minister Viktor Orbán is one of the vice-presidents of the European People's party, so the EPP has a special responsibility to act quickly and decisively to safeguard the founding values of the European Union and protect its own image.

Principality of Liechtenstein views the European Union

Recently the General Affairs Council (GAC) of the European Union adopted conclusions about the relations between the EU and the four EFTA countries: the three members of the European Economic Area (EEA) Iceland, Liechtenstein and Norway, as well as fourth EFTA member Switzerland, which remains outside the EEA:

Council conclusions on EU relations with EFTA countries; 3060th GENERAL AFFAIRS Council meeting Brussels, 14 December 2010

We took a first look at Liechtenstein in the blog post 'EU relations with Liechtenstein (general conclusions)' (22 December 2010), presenting the general remarks including Liechtenstein, but addressed at the EEA or EFTA states.

Since Liechtenstein and its relations with the European Union are not widely known, we are going to look at some materials about and from this fascinating Principality.


Liechtenstein background

Here is a link to the Wikipedia article about the Principality of Liechtenstein (German: Fürstentum Liechtenstein), a country with more registered companies than citizens.

Digital Liechtenstein offers you added opportunities to look at interesting topics in English, German, French or Chinese.


EEA Fact Sheet

The EEA Coordination Unit offers readers a recently updated brochure in English: European Economic Area (EEA) Fact Sheet (November 2010; 12 pages).


EEA population

A brochure detail: On the authority of the CIA World Factbook the brochure starts by stating that the EEA is a single market of about 496 million consumers (as per July 2010).

Why not check the facts instead?

According to Eurostat we have the following population figures for 2010:

EU 27 501090520
Iceland 317630
Liechtenstein 35894
Norway 4858199

This adds up to an internal market of about 506 million people. If we equate inhabitant with consumer (as I suppose the intention has been), the population of the European Economic Area exceeds the number in the folder by ten million.


EEA Coordination Unit

There is an explanatory web page in English about the EEA Coordination Unit, with a link to the active pages in German of Stabsstelle EWR.


Embassy of Liechtenstein in Brussels

Another important player is the Embassy of Liechtenstein in Brussels. It serves as a mission to the European Union and handles EEA and EFTA affairs (besides functioning as the Embassy to Belgium).


Detailed EEA report

There is a fresh government position paper, with a detailed evaluation of Liechtenstein's 15 years in the European Economic Area (23 March 2010), in German:

Bericht und Antrag der Regierung an den Landtag des Fürstentums Liechtenstein betreffend 15 Jahre Mitgliedschaft des Fürstentums Liechtenstein im Europäischen Wirtschaftsraum (EWR) Nr. 17/2010 (306 pages)

In a nutshell, the report depicted the 15 year EEA membership as a Liechtensteinian success story.

On 21 April 2010 the Liechtenstein Parliament (Landtag) took notice of the annual report of the EEA/EFTA parliamentary delegation as well as the EEA report from the government (Jahresbericht 2009 der Delegation für die EWR/EFTA-Parlamentarierkomitees Information; 15 Jahre Mitgliedschaft des Fürstentums Liechtenstein im Europäischen Wirtschaftsraum (EWR), (Nr. 17/2010) Landtagsprotokolle 21 April 2010).

The discussion gave me the impression that the positive assessment of EEA membership is shared by the Landtag, even if coordination with neighbouring Switzerland outside the European Economic Area requires constant attention.

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The next blog post in this series is going to change perspective, from the Liechtensteinian viewpoint to EU materials and resources.



Ralf Grahn



P.S. Mathew Lowry wrote a timely blog post called 'Censoring Hungarian blogs during the Hungarian EU Presidency' spreading the word about the ignominious media law and the Twitter Hashatag #NoToHuEU.

The presidencies of the Council of the European Union were supposed to be about team spirit and presidency trios. It worked during the Belgian presidency @EuTrioBe on Twitter. Why did the government of Hungary discard this manifestation of European team spirit? I hope that the hashtag #EuTrioHu will keep the idea alive, despite the nationalistic Twitter address @HU_Presidency by a government badly discredited even before the presidency starts.

European Economic Area (EEA) in practice

The European Economic Area (EEA) extends the four freedoms of the European Community to the EFTA states Iceland, Liechtenstein and Norway, giving them access to an internal market of 30 states and almost 500 million people. Agriculture and fisheries are excluded, but the EFTA EEA countries cooperate in other policy areas as well.

The basic document is the Agreement on the European Economic Area. More information is available on the EFTA web pages about the EEA Agreement.



Quick overviews are offered by a number of EEA fact sheets.


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Technical adaptation

The European Community (European Union) legislation in the relevant areas is constantly evolving. The purpose of this blog post is limited: to show how “technical” new provisions are adopted by the non-EU members. Article 98 of the EEA Agreement spells out the mechanism for amending the Annexes to the Agreement, as well as the Protocols mentioned:

Article 98

The Annexes to this Agreement and Protocols 1 to 7, 9 to 11, 19 to 27, 30 to 32, 37, 39, 41 and 47, as appropriate, may be amended by a decision of the EEA Joint Committee in accordance with Articles 93 (2), 99, 100, 102 and 103.



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In practice

The Official Journal of the European Union (OJEU) 28.5.2009 L 130 offers examples of recent Decisions by the EEA Joint Committee, numbers 21 to 39/2009 amending Annexes.


Joint Committee Decision 40/2009 amends Protocol 31 on cooperation in specific fields outside the four freedoms.



Ralf Grahn