The U.K. government paid a former employee of Liechtenstein's largest bank for data on its citizens, who hold accounts in the onshore tax haven, according to a Sunday Times report (confirmed by H.M. Revenue and Customs).
Most people have realised by now that the British government is unable to keep data on its citizens safe. But it has been thought rather inconceivable that the government has lost so much important data, it would need to buy it from a criminal. Those, who got their hands on (oh) H.M.R.C. data discs a few months ago, may just find that their top customer will be a European government.
Britain is not the only government encouraging criminal data trade in Europe. Germany paid a far larger sum to, apparently, the same criminal for data on its own citizens' accounts in Lichtenstein. Some senior executives, whose houses were raided last week, have already resigned.
But what happens in more equitable, trade-unionist and tax-burdened Germany need not happen in the lightly-regulated U.K. Alistair Darling, the Chancellor of the Exchequer, is already under a lot of pressure to pull back the tough new taxation rules for non-domiciled residents, who have been integral to financial development and employment in London.
Liechtenstein, like only Monaco and Andorra, is an "unco-operative tax haven", according to the Organization for Economic Co-Operation and Development. By not co-operating, the O.E.C.D. says, Lichtenstein could be breaking accounting and money-laundering standards. The British government has knowingly bought a potential criminal's stolen goods from a convicted criminal for immediate gain.
Tax evasion is a serious issue, but fighting it should not cloud's the government vision of economic growth. The hundred British citizens, whose data the government has just bought, are probably all non-domiciled in the U.K. and therefore not liable to pay tax on foreign income kept away from the Albion in a Liechtenstein bank. The outrageous breach of privacy and loss of trust in the financial system and lawful procedure is going to cost the government more than the tax revenue it will recover.
P.S. The Guardian reports today (26 February) that H.M.R.C is indeed targeting non-domiciled residents, as well as ordinary citizens, for tax evasion by purchasing the data. This doesn't seem to make much sense. The non-domiciled residents would only keep income, which they earned abroad (the bulk), in Liechtenstein (since it doesn't matter for them where to keep it as long as it is not in the U.K.) and right now they do not get taxed on it anyway. Darling proposed that they from April they pay a fixed levy and not have to declare their foreign income, essentially giving them an incentive to hide their money. He should really stick to one plan.
P.P.S. Bronwen Maddox, writing for The Times, pointed out today (27 February):
But at this point, until the German cases progress, the clearest criminal
activity in Liechtenstein is on the part of the employee who sold the
secrets and, arguably, on the part of the German and British governments in
buying them. Tax havens have few defenders — but neither should
criminal behaviour in pursuit of criminals.
Yet few commentators have made a point that by crude measures, such a data theft, big players in the O.E.C.D and the E.U. may destroy the economies of small tax havens.
