Thursday, September 19, 2013
Standard and Poor's has maintained Liechtenstein's triple A rating, alluding to a stable outlook and highlighting the fact that the Principality's fiscal and financial policies have very much contributed to Liechtenstein's reputation and strength as a safe, reliable, and attractive economic location.
As regards tax policy, the ratings agency emphasized the Government's ongoing commitment to pursuing a fiscal consolidation course to narrow the small fiscal gap. Here, Standard and Poor's noted that the Government recently submitted its third fiscal package to parliament, providing for new revenues totaling around CHF39m (USD42m), to compensate for an anticipated shortfall of tax income. The package provides crucially for a rise in the minimum income tax and for cuts in expenditure. The Government accounts are expected to return to balance in 2017.
Underscoring that economic growth in Liechtenstein relies predominantly on the country's banking and industrial sectors, Standard & Poor's explained that the Principality's low tax regime, coupled with its traditional banking secrecy, and stable political environment, have supported the development of a large financial services sector, which contributed about 27 percent of gross domestic product in 2010. While describing the financial industry, consisting mostly of asset managers, regional banks, and trusts, as a "contingent fiscal liability," the agency nevertheless stressed that the risk is mitigated by the industry's strong capitalization and banks' potential access to the Swiss National Bank (SNB).
While making clear that Liechtenstein's heavy reliance on the financial services industry could lead to "reputational issues," the body praised the proactive work of the Government in swiftly meeting the demands of international regulators, notably by adopting the latest anti-money laundering legislation. Furthermore, it underlined the Principality's commitment to tax compliance and extolled the country's tax agreement policy, in particular its willingness to automatically exchange tax information with other jurisdictions, especially with the UK and with the US. This "effective policy making" is expected to continue, it said, adding that it believes that "the Principality will continue to adapt its financial sector to business models that focus less on banking secrets and tax evasion," vitally important if external regulatory pressures mount.
Commenting, Liechtenstein's Prime Minister Adrian Hasler stated that the triple A rating will enable the country to offer itself up as a highly stable and attractive economic location. However, the top priority for the Government is still to consolidate the state budget, Hasler warned, while insisting that the Government is on track.