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Liechtenstein works to shake off 'tax haven' tag

December 2, 2011 -- Updated 0159 GMT (0959 HKT)
STORY HIGHLIGHTS
  • Liechtenstein is one of Europe's most robust economies
  • It's attempting to shake its tag as a tax haven following international pressure
  • Liechtenstein's Prince Alois says he is concerned about the eurozone crisis

(CNN) -- Liechtenstein, a tiny principality nestled in between Switzerland and Austria, is attempting to shake its tag as a tax haven following intense international pressure.

Since 2008, it has signed at least 20 Tax Information Exchange Agreements with countries across the world including Germany, the UK and the United States.

The principality's Hereditary Prince Alois said Liechtenstein still has strong banking secrecy but has a more open taxation system. "I would say today we are a safe haven, rather than a tax haven," he said.

Liechtenstein is one of Europe's most robust economies, but despite this Prince Alois is not immune to concerns over the eurozone debt crisis. According to the heir apparent, the general view of the situation is "that we have to suffer in the next few years."

With this in mind the nation is considering cutting back its social security system as it faces the headwinds of Europe's economic crisis. The Prince said such a move would be unpopular, but there may be no option.

"Our social security system is on a higher level than Switzerland, people won't like it if we move down to a Swiss level, but it would be much easier," he told CNN. It's an area the Prince has identified which needs to adapt amidst the current uncertainty. That compares to the principality's manufacturing industry, which he says will more or less have the ability to continue in the same as it has always.

Liechtenstein has a population of just 35,000 but has managed to build and sustain a strong industrialized economy, with production making up a large proportion of its GDP. The Prince said Liechtenstein's challenge was to ensure it remained an attractive business environment, and that it continued to lure highly skilled professionals.

The principality's location is a major benefit, the Prince said. Its proximity to Switzerland, Australia and Germany allowed it to tap markets with high quality universities.

CNN's Emily Smith contributed to this report.

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