Let us try and tie together the strands in the war against tax evaders and then move on ...

Le Monde’s Geneva correspondent earlier this week claimed that no trace of the taxes allegedly evaded by wealthy Germans was coming through Switzerland, which neighbours Liechtenstein and sometimes acts as its diplomatic representative overseas.

Since Liechtenstein is likely to be just a ‘way station’, it raises some questions as to where the money was heading ultimately – in effect, how it was being ‘laundered’. Whatever the truth, this story is just not going to go away. One link in the chain ineluctably leads to another.

The campaign against the evaders has now extended over recent days. The US, UK, Finland, Sweden and Norway were soon involved, then the Czech Republic, Spain, Italy and Australia and now many others. The ‘sting’ on the Liechtenstein Royal Bank seems to have been carefully planned to ensure the fullest possible OECD member take-up of the evidence.

A key question is going to be whether the informant [now named in the media as Heinrich Kieber] and his accomplices responded to an opportunistic, financially-driven bit of 'criminal' (from a Liechtensteinian perspective) entrepreneurialism or whether the whole thing was initiated by some kind of OECD & combined Treasuries ‘special ops’.

The truth is that we just do not know because the authorities are only telling us only what they want us to know. They have no incentive to suggest that they were anything more than outraged when they were offered the material and, having weighed their consciences, passed it on to other countries after much anxiety and soul-searching. Ahem!

And yet the revelations so far do imply that this material has been around for some time and that there has been some significant co-ordination to allow its release to be centred on one country where public opinion would most easily sweep away any troubling aspects about how it was acquired. Let us keep an open mind.

The instant reaction of the Swiss Banking Federation (quickly withdrawn) is interesting. It was that the BND were ‘acting like the Gestapo’. The gentleman may have withdrawn the comment later but only because anything that reminds the Germans of what they once were is always regarded as in appalling taste in contemporary Europe. 

It is why the satirical line 'don't mention ze war' is such a popular catch-phrase in England, much to the irritation of liberal but rather serious German Ambassadors. But what the Swiss banker said in an unguarded moment is only what many of the haute bourgeoisie in the other smaller nations, whose economy depends on ‘laundering’ and financial services, think. 

These comfortable burghers are in no doubt that the Liechtenstein campaign is equally directed at them, or rather their banking establishments.

But there is little honour amongst thieves, as they say - the Monegasques were keen to distance themselves from the Liechtensteinians and claim that, despite negative publicity, they were much better policed by Paris than Vaduz was by Berlin. The Prince by the sea does not quite demand that his sovereign independence be as honoured as the Prince in the mountains.

If Monaco has ostentatiously committed to co-operate with the German investigation, Leichtenstein is in heavy resistance mode, asking the German authorities for help in the criminal enquiry into the alleged ‘thief’. Let us see how long it can last out ...

The larger ‘smaller’ countries [City of London, Switzerland] also have ‘enemies within', whether bureaucratic or political, who would happily break the power of finance capital within their respective jurisdictions.

The separate issue of the taxation of non-domiciled residents in the UK is a test case between those who tend to a 'European' view of the necessity of a fair and equal tax base and those with a 'global' view who are mounting a vigorous and frankly increasingly persuasive campaign that such taxation is counterproductive in the context of London's pivotal role in the global trading economy.

Luxembourg, on the other hand, a prime target in 2001/2002 as we know from our own client experiences, now seems to be off the OECD rogue list even if it is still in the query basket.

The local Clearstream scandal was a long-running and increasingly baroque affair that threatened to undermine the small country but which seems now to have receded into the past, although we should never underestimate the ability of a case study scandal to come back from the grave.

A stake may have finally been driven through BCCI's heart so that it can now rest easy but the Taiwan Frigates affair is alive and kicking and both Total and BAE Systems are spending their corporate lives looking over their shoulders.

What the campaigning activists and bureaucrats do not yet dare – certainly while the political debate demanding a referendum continues in the UK – is to place London too obviously on the target list, although there are frequent shots across the US Treasury bow from OECD gunboats.

Once the European Treaty is out of the way, we can reasonably expect the UK Treasury to adopt some European ideas of its own and some significant political attacks on the fringe activities of the City and the small tax havens within the UK.

As we write, the OECD has named Cyprus (now with a Communist President), Panama and Singapore (with a significant sovereign wealth fund) along with Liechtenstein as primary targets, with Austria, Luxembourg and Switzerland in a second category (although these are all, like the City of London, slowly bending to OECD will).

But, as we noted in our previous piece, history is with the European regulators and not just because of the need to secure a tax base for reasons both decent and sinister. 

European social standards, which raise the expenses of the state and help create the demand for revenue, are also beneficial in social and welfare policy. They are one of the reasons that there is so much left-wing buy-in to some of its more petty tyrannies. Indeed, some left-wing resistance to the European ideal in the UK derives from the belief that these social standards will be watered down in the drive for economic competitiveness.

Coincidentally (genuinely this time), a children's care home scandal on Jersey – involving alleged murder and almost certain child abuse – is raising doubts about its quasi-independent status precisely because its standards fell far below European norms. British police are currently digging up concrete floors and finding at least one body and a disturbing pair of shackles.

The treatment of children in care, even in mainland UK (no longer brutalized, just neglected), is not only a scandal but a social error. Dumped on the streets when they reach the age they can fend for themselves, many feed the alternative organized crime network with victims and operatives. They deserve better.

In the early twenty-first century, it beggars belief that any G8 State can still not adequately resource protection for its weakest and most disadvantaged children, but at least Europe has raised the bar a little. 

Jersey's failures (similar to another long-past scandal in Northern Ireland that was notoriously covered up, for alleged reasons of state), though it claims to have cleaned up its act, now becomes a back-door argument for Euro-technocratic interventions elsewhere so that the 'rich' (in this sense) are perhaps getting a bit of a come-uppance for ignoring social problems while they stashed the cash.

The regulatory process is likely to win out in the end, but if it fails to deliver the level of welfare and social improvement that it is assumed is the whole point of the exercise (rather than just more efficient markets), then the back-lash will be considerable ... but let's not continue to flog that old dead horse.

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