Tax havens under more pressure to open books

VADUZ, Liechtenstein — Liechtenstein's Prince Alois agreed earlier this month to start following the rules set down by the Organization for Economic Cooperation and Development in Europe aimed at curbing tax havens — like his scenic patch of mountain valley between Switzerland and Austria, which owes much of its prosperity to its role as a place to put money.

With governments around the world straining to pay for bailouts and fiscal stimulus, some 35 or so offshore tax havens — from Britain's Channel Islands Jersey and Guernsey to the Cayman Islands in the Caribbean — are under increasing pressure to let in more light.

One by one, they're caving in.

"We're in the middle of a power struggle, and the big countries can do what they like," said Michael Lauber, chief executive of the Liechtenstein Bankers Association.

A study by the Boston Consulting Group estimated that $7.3 trillion is stashed in offshore banking centers by people either taking advantage of low taxes or simply evading notice of tax authorities back home. For years, tax evaders have been spooked by rumors that German intelligence agents lurk outside Liechtenstein banks to record license-plate numbers.

German authorities even began a tax investigation earlier this year against Prince Max, the younger brother of Prince Alois and the chief executive of the country's biggest bank, LGT Group, for allegedly failing to meet fiscal obligations at his residence in Germany.

Liechtenstein banks alone manage some $200 billion, while the principality's anonymous trusts control several times that much abroad. That money helped transform Liechtenstein from an austere Alpine backwater about twice the size of Manhattan into a major financial center with the highest gross domestic product on the planet — $118,000 per person.

In a sign that Liechtenstein is preparing for a new era, construction cranes dot the landscape and advertisements have sprung up touting the principality as an all-year tourist destination.