Ransacked after two world wars, the tiny nation of
Liechtenstein spent much of the first half of the 20th century decidedly
strapped for cash. The European country was struggling to get by as a mostly
agriculture-based economy, leaving its ruling family forced to sell off its Old
Master paintings to the highest bidder.
Now, Liechtenstein, which today (Jan. 23)
celebrates the 300th anniversary of the principality’s creation, is thriving.
The country is the world’s richest country per capita, driven by a 12.5%
corporate tax rate—among the lowest in the continent—and freewheeling
incorporation rules resulting in many holding companies establishing offices in
the country’s capital, Vaduz.
Despite significant obstacles to
trade—Liechtenstein is double-landlocked, meaning it is surrounded by
landlocked countries and far from an ocean port—the nation is a poster-child
for globalization. In a government brochure welcoming new migrants, former
prime minister Klaus Tschütscher described it as “an everyday operational
reality. We need to interact with other countries, including foreign cultures,
and our companies in a wide variety of sectors rely on foreign labour. This
interaction is only possible because, despite the diminutive size of our
country, we have kept our eyes open to the outside world.”
With a total area roughly the same as New York’s
Staten Island, the country has a population of around 40,000, of which around a
third are foreigners. It is a member of the European Free Trade Association and
part of both the Schengen Area and the European Economic Area. (The country’s wealth
and lack of EU membership has proven inspirational (paywall) to many
starry-eyed Brexiteers.)
Liechtenstein’s transformation from penury to
prosperity took nearly a century. Historically a nominally independent state
within the Holy Roman Empire, Liechtenstein was later affiliated with the
Austro-Hungarian Empire. After World War I, and the empire’s breakup, the
nation found itself on the edge of bankruptcy, following the collapse of the
Austrian monetary system, with its export market almost evaporated. Desperate,
it entered into a customs and monetary union with Switzerland in 1924, allowing
it to eventually develop into a modern industrial and service industry state.
The country used its low taxes as a selling point.
In 1955 Liechtenstein, described itself (paywall) as a country “where citizens
dwell virtually tax-free, and where similar freedom awaits foreign
corporations.” (The top tax rate at that time was 1.4%.) Foreign corporations
with headquarters in Liechtenstein could enjoy “only minimal taxation”—as well
as dreamy mountain views. Change did not come as swiftly as the country’s
rulers might have liked: At an especially dire point in the 1960s, its ruling
family was forced to sell off its Old Master paintings to the highest
bidder—among them Leonardo da Vinci’s counterpart to the Mona Lisa (paywall)
and four Breughels formerly displayed in prince Franz Josef II’s Austrian
hunting lodge.
By the 1970s, however, the country’s economy was
booming. The CIA World Factbook now describes the country as “a prosperous,
highly industrialized, free-enterprise economy with a vital financial services
sector.”
More recently, Liechtenstein has faced
international pressure over a lack of transparency in its banking and tax
systems: It was placed it on an EU blacklist of countries that would not
cooperate with tax investigations. Until 2009, it frustrated German and US tax
authorities by distinguishing between tax evasion and tax fraud, and refusing
to supply foreign nations with data except in outright cases of tax fraud. It
remains a tax haven of sorts: Even the LGT bank, which is owned by the royal
family, was described by a US senate subcommittee as “a willing partner and an
aider and abetter to clients trying to evade taxes, dodge creditors or defy
court orders.”
Despite being an economic powerhouse, the
principality retains a certain other-worldly sleepiness, even beyond its
princes and fairytale castles. Residents are discouraged from “mowing the lawn
or having noisy festivities” during “general normal quiet periods”—including
“the lunch break from 12.00 noon to approx. 1.30 pm.” Locals also enjoy a
state-mandated week of “sport holiday,” observed in February or March. There is
no airport or state railway system—its residents and workers rely on a bus network
to get around.
Its politics remain stuck in the past too: until
1984, it denied women the vote. The country has two ruling princes—the head of
state, Hans Adam II, and his son, Alois, who now performs day-to-day duties—who
were previously a banker and an accountant before assuming their roles. Since
2003, they have had the right to veto parliamentary decisions, appoint judges,
and sack the government. The country’s princes may be high up in their castle
on the hill, but they are watching closely nonetheless.
Source: MSN
No comments:
Post a Comment