Berlin The head of government of Liechtenstein, Daniel Risch, criticizes the one-sided focus on higher taxes in the debate about a global minimum tax. As an economic liberal, he is reluctant to lead the discussion about how much the state is at least entitled to. “We could also discuss a maximum tax,” he suggests in an interview with the Handelsblatt.
However, the head of government warns that some initiators of the tax deal could undo it themselves. “It must not be that individual, perhaps even larger, states find special rules with which the system can be circumvented.”
Risch’s main focus is on subsidies and tax exemptions that some countries or regions use to encourage companies to set up shop. “Especially when it comes to setting up a company, there are very generous packages in various countries,” says Risch. “In Germany, too, there have been corresponding initiatives in the past.” These would run counter to a global minimum tax.
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Read the full interview:
Mr Risch, Olaf Scholz, one of the architects of the global minimum tax, is moving into the German Chancellery. You initially criticized the corporate tax of 15 percent. Do these differences have an impact on the relationship between Germany and Liechtenstein?
Not at all, you have to separate them. Just because you don’t agree 100 percent on certain topics doesn’t mean you can’t have good relationships anyway. We also support the consensus. I definitely see the added value of a global solution. But we Liechtensteiners are economically liberal. We don’t like to discuss how much the state should at least take from entrepreneurs. We could also discuss a maximum tax.
What do you expect from a maximum tax?
I don’t ask for a maximum tax, I see it more as a thought experiment. Behind this is my conviction that the state should not simply help itself, but must consider how it can position itself leanly and still fulfill its tasks. That would also be an interesting discussion. It would also quickly show that the agreed global tax threshold is somewhat arbitrary.
Liechtenstein has so far had a corporate tax rate of 12.5 percent. Have you considered defending yourself against the minimum tax?
No, global consensus is important to us. But of course it does matter how the agreement came about …
The big industrial nations have presented the smaller countries with a fait accompli.
More than 140 countries are represented in the so-called inclusive framework of the G20 / OECD. That would be the body that should actually have decided. But the outcome of the negotiations was already predetermined by the G7 and G20. We have addressed this several times and received encouragement for it. We sure never have a loud voice, but we raise it when we need to.
There shouldn’t be any special rules
When would you raise your voice again?
Many details are still unclear. If the agreement on the global minimum tax holds that way, we can live with it. But it must not be the case that individual, perhaps even larger, states find special rules with which the system can be circumvented.
What special rules do you fear?
Some states give companies tax breaks. There are very generous packages in various countries when it comes to setting up a company. Similar initiatives have also taken place in Germany in the past. We in Liechtenstein do practically nothing in this area. Granting companies tax breaks or even tax exemption in the first few years of course runs counter to a global minimum tax.
How do you react if the global minimum tax should be raised to 17.5 percent or even to 20 percent in the coming years?
Then of course you have to ask yourself what we were negotiating about in 2021. Initially, there was talk of ‘at least 15 percent’ in the negotiations. Now it’s exactly 15 percent, and we hope it stays that way.
Olaf Scholz once said that Germany could learn something from Switzerland on the subject of wealth tax. Can Germany learn something from Liechtenstein, for example in foundation law?
I don’t think we’re in a position to give Germany tips. The economic model of small countries like Liechtenstein cannot simply be transferred to large economies like Germany. The idea that performance should pay off works very well for us.
This idea also appeals to German entrepreneurs who have recently been increasingly gathering information about family foundations in Liechtenstein. Do you feel that more money from Germany is being invested in Liechtenstein foundations?
The number of family foundations in Liechtenstein has been falling for years. Nevertheless, the Liechtenstein Foundation is a tried and tested and recognized instrument for succession planning, asset protection and philanthropy. Not least because Liechtenstein was one of the first countries to adhere to the OECD standard for transparency and the exchange of information on tax issues, the so-called automatic exchange of information, and has therefore been exchanging tax data transparently with well over 100 partner countries for years.
With Olaf Scholz moves one of the architects of the global minimum tax into the German Chancellery.
(Photo: Reuters)
On the issue of global minimum tax, Switzerland and Liechtenstein pulled together – and grudgingly accepted the compromise. This does not always apply to relations with the EU: Liechtenstein has been part of the European Economic Area for 26 years, while Switzerland, on the other hand, continues to alienate itself from the EU after the failure of the framework agreement. Couldn’t you mediate?
We very much regret that the relationship between the EU and Switzerland may not be the best right now. A lot has to be done on both sides to improve relationships. Of course, we use our opportunities and contacts to encourage mutual understanding and at the same time point out our special situation. In the end, however, it remains an issue between the EU and Switzerland.
Liechtenstein between Switzerland and the EU
To what extent is the Principality affected by the failure of the negotiations between Switzerland and the EU?
It is a balancing act to have a customs and currency union with Switzerland at the same time and to be integrated into Europe via the European Economic Area (EEA). For example, our banks are closely linked to the SIX Swiss Exchange. And although we are part of the EEA, the EU only accepts our trading center to a limited extent. A solution has to be found. It also goes in the other direction: Due to the EU directive on the freedom to provide services, it is easier for Austrian and German companies than Swiss companies to accept orders in Liechtenstein. Even if we don’t like such examples, the current form of cooperation with Switzerland and the EU is still the optimal case for us.
How can movement be brought to the confused situation?
I understand the EU that it has a hard time dealing with countries that do not belong. But Switzerland also makes its contribution to the community as a non-member. It is important that this is recognized in Brussels. But I also believe that it is important that the entire German-speaking area helps to show understanding for Switzerland. If we can play a role in this, we will be happy to do so.
After seven years, Switzerland ended negotiations on a framework agreement on bilateral relations that Brussels wanted, at the end of May this year.
(Photo: dpa)
Why is Liechtenstein getting involved on the international stage with initiatives such as “FAST”?
We want to work more closely with other countries in the fight against crime, and especially in the fight against slavery and human trafficking. This is a $ 150 billion criminal market and the money flows through the international financial system. In analyzing financial flows, we have built up specialist knowledge that we want to share even more. We therefore hope that even more countries will join our “Finance Against Slavery and Trafficking (FAST)” initiative. The fight against money laundering and the financing of terrorism is always a question of resources. No state is allowed to save.
Germany has been criticized both domestically and internationally for doing too little on the subject of money laundering. The Financial Intelligence Unit in this country is notoriously poorly staffed, and suspicious transaction reports are not processed comprehensively. Could Liechtenstein do some development work here?
We basically work well with the German authorities. Our financial investigators already offer training in certain areas in other countries, including Germany. This exchange is extremely important and it works well. We believe that analyzing financial flows is a powerful approach to combating international crimes. We like to pull the cart, even if we are only a small country.
Thank you for the interview.
More: Fear of the wealth tax: The new run on foundations in Liechtenstein.