KEY POINTS:
Long-distance trains don't stop in Liechtenstein's capital, Vaduz, because the place has no mainline railway station to speak of.
When Crown Prince Alois, the principality's head of state, wants to travel by plane, he has to take a car to neighbouring Austria because there is no airport either.
This may seem odd for an Alpine country not only rated as one of the richest in the world but which likes to attribute at least part of its wealth to its role as global industrial player, as manufacturer of a tool considered indispensable in modern construction: the Hilti drill.
But prowess on the world's building sites plays only a minor role in the Liechtenstein success story. As European governments have been sharply reminded over the past 10 days, the principality, sandwiched between Austria and Switzerland, owes its reputation and wealth to its role as one of the world's most secretive tax havens.
In the last week authorities around the globe have launched inquiries into tax evasion schemes run from Liechtenstein. The United States Internal Revenue Service (IRS) said it was "initiating enforcement action" and that it was co-operating with seven other nations "following revelations that Liechtenstein accounts are being used for tax avoidance and evasion".
IRS Acting Commissioner Linda Stiff warned in a statement: "Anyone with hidden income and gains would be well-advised to make a prompt and complete disclosure."
The atmosphere is almost palpable on the sleepy streets of Vaduz. Overlooked by its medieval mountain-top castle, glistening bank facades jostle for space with investment firms and dubious "letter-box" holding companies of which the country boasts an estimated 73,700.
Liechtenstein does not need a railway station because few of its paying clients make a habit of travelling by train.
Instead, Mercedes and BMW limousines, usually with German number plates, briefly grace the streets of Vaduz, usually shortly before lunchtime, before they disappear out of sight into the underground garages of the banks.
Among the occupants of the cars are the tax evaders who have helped to put Liechtenstein on an OECD blacklist of only three countries in the world classed as "unco-operative tax havens". The others are Andorra and Monaco.
"Excessive bank secrecy rules and a failure to exchange information on foreign tax evaders are relics of a different time and have no role to play in relations between democratic societies," Angel Gurria, the OECD's secretary general, said last week.
Liechtenstein has remained an exception. Banks and "discreet" financial services are the core of its economy.
They account for 14.3 per cent of the workforce and contribute to 30 per cent of a gross domestic product of A$2.7 billion ($3 billion).
The Liechtenstein royal family happens to own the country's largest bank and wields more power than any other monarchy in Europe.
The country has more registered companies than its 35,000 citizens and a maximum tax rate of 18 per cent. The Liechtenstein system works as follows: the principality has 15 banks and more than 300 trustees, usually lawyers, who manage thousands of stiftungen, or "foundations".
The Liechtenstein banks' foreign customers favour stiftungen above most other investments because they are hardly obliged to pay any tax if they put money into them. The rules governing anonymity are also highly favourable.
If a customer wants to remain anonymous, he or she simply appoints one of the principality's trustees to run their investments.
Being tax-free, the investment grows far more quickly than in a normal account and, as the account holder remains anonymous, the tax authorities, in his or her country of residence remain unaware that sums are being filched away illegally from under their noses.
Apart from a few hiccups involving secret Liechtenstein bank accounts held by the German Flick family of Nazi-era industrialists and members of Germany's conservative Christian Democratic Party who were exposed during the early 1990s, the system has worked famously for the principality, its clients and royal family.
Crown Prince Alois, 39, even attempted a robust defence of his country's banking system late last week.
"We just don't behave like a nanny and ask people continuously, 'Have you paid your taxes?' I think this can't be our role."
But with so much money involved and Liechtenstein surrounded by neighbours hostile to its secretive tax-haven policy, its system was a sitting duck for anyone able to get their hands on the names of the trustees' "anonymous" investors.
If Liechtenstein's bankers are to be believed, the man responsible for the principality's present confidentiality crisis is a dangerous supergrass called Heinz Kieber, a 50-year-old Liechtenstein citizen who began working for the principality's main bank, the Liechtenstein Global Trust (LGT) in 1999.
Kieber secured a post as a full-time LGT employee in April 2001. He held the job until November 2002. LGT claims Spain issued an international arrest warrant for Kieber who was wanted for property fraud in 1997. The Liechtenstein authorities caught up with Kieber in 2001 and are said to have fined him A$370,000.
In 2002, Kieber decided to leave Liechtenstein but not before allegedly stealing copious amounts of secret client data from LGT and copying it all on to four DVDs that have since proved highly lucrative for him.
At that point, Liechtenstein dropped all legal proceedings against him, saying it was convinced he would not damage his country's interests.
The authorities were badly mistaken. In 2004, Kieber offered his information to the US and British tax authorities in return for cash. The Americans paid up and traced 50 tax evaders.
German reports claimed the British refused to pay Kieber until they had recouped the sums illegally stashed by UK tax evaders. Apparently, in January 2006, Kieber "got fed up" and approached Germany's equivalent of Britain's MI6, the Bundesnachrichtendienst (BND) foreign intelligence agency.
Kieber did not meet BND officers until May that year, and a month later they bought the data from him for a sum estimated to be in excess of A$4 million.
However the information was procured, the data now threatens to be explosive for Europe's monied tax evaders, and not only those in Germany. The informer is now said to be living in Australia under an assumed identity.
Despite his alleged differences with the UK tax authorities, Kieber was reported to have provided them, in return for £100,000 ($243,000), with the names of some 100 wealthy British citizens alleged to have evaded tax with Liechtenstein accounts.
In Germany, BND officials boasted last week that they had "cracked an entire bank" just as financial police and state prosecutors who specialise in tax evasion pounced.
They announced that the names of more than 1000 wealthy Germans who were potential Liechtenstein bank clients had fallen into their net and that they were suspected of robbing the country's taxpayer of A$4 billion.
The first prominent German to be caught by tax police was Klaus Zumwinkel, the 64-year-old former head of the partly state-controlled postal service, Deutsche Post, a captain of industry.
Zumwinkel, who earned more than A$20 million during his 18 years as Deutsche Post boss, is suspected of stashing at least A$1 million in a LGT account in Liechtenstein.
Germany's state prosecutors tipped off television crews before they raided Zumwinkel's Cologne villa and offices to maximise the negative publicity.
But Zumwinkel was just the tip of a tax-evasion iceberg; possibly more than 1000 other Germans were involved. Further tax raids have been made and more are expected. Kieber's DVDs have enabled Germany's politicians to indulge in an almost unprecedented bout of righteous indignation.
Now Chancellor Angela Merkel has demanded Liechtenstein open its secretive foundations to tax officials. She has threatened to isolate the country by refusing to ratify its accession to the Schengen passport-free zone, if it fails to comply.
The head of the Swiss Banker's Association has accused Germany of using "Gestapo" methods to track tax evaders, and Crown Prince Alois has accused the Merkel government of spying on his country and putting "fiscal interests above the rule of law".
THE SECRET STATE
34,247
The population of Liechtenstein
160 sq km
Area: about twice the size of Waiheke Is.
689
people are unemployed (2.3 per cent)
$4.9 billion
Estimated fortune of Prince Alois
One of only two doubly landlocked countries in the world - a landlocked country wholly surrounded by other landlocked countries. The other is Uzbekistan.
90 kms
Countryside in bicyle paths
False teeth: One of the country's major exports, along with concrete fastening systems.
- INDEPENDENT
