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Associated Press

March 29, 2001; Thursday

Prince attacks OECD criticism of tax regime

     (VADUZ, Liechtenstein)  Rich, powerful countries are trying to impose a ''worldwide tax cartel'' that will damage smaller nations, the ruling prince of Liechtenstein charged Thursday. 

     In a speech at the opening of the principality's parliament, Hans Adam II hit back at the 30-nation Organization for Economic Cooperation and Development, which has accused Liechtenstein of being a dangerous tax haven. 

     The monarch of the Alpine principality said the Paris-based OECD's attempts to enforce tax standards was an attempt by the organization which groups the world's richest nations to take control.

     ''Tax harmonization is nothing other than a friendly way of describing an attempt to create a worldwide tax cartel,'' the prince said. 

     ''Should we all bow to the dictates of the OECD? Do we want a world government called OECD which is responsible to no one except a few politicians who pull the strings behind the scenes?''

     Last year the organization published a list of 35 tax havens _ including Liechtenstein and said it would consider sanctions against them if they did not change their tax policies by 2005. 

     It said harmful tax practices can distort the global economy, lead to serious revenue losses to governments and be particularly damaging for developing countries.

     In a separate report the OECD singled out Liechtenstein for its bank practices, which it said led criminals to use the system for money-laundering. 

     Liechtenstein at the time defended its tax system as ''an economic factor for a small state.'' The tiny Alpine nation has been transformed in recent decades from an impoverished farming nation into a wealthy industrialized one primarily because of its financial services industry.

     The country has a population of 32,000, but more than 75,000 businesses are registered there, primarily because it has a maximum corporate tax rate of 18 percent. Personal tax for residents can be close to zero.

     The prince said nations had to struggle to ensure that ''people do not subside into a new form of serfdom'' where an end to tax competition meant half their earnings were taken back by the state.

     Also in his speech, the prince said he was giving up certain powers, including the right to name administrators and to veto the appointment of judges. But he stopped short of giving up the monarch's emergency powers.

     The prince had been under pressure from the former government to give up those powers. In return, he had threatened to quit the country and move his family to Austria.

     However the ruling Fatherland Union party, which had been most critical, was ousted from power by voters in elections last month. The right-of-center Progressive Citizens Party, which now holds the majority in government, is much less concerned about the prince's powers.

     The prince has generally insisted that change should be made by the people rather than the government.

     In his speech he said he said the people but not the government should have the right to hold a no-confidence vote and remove a ruling prince, or to vote for the abolition of the monarchy.

     ''We could live perfectly well with a monarchy which only has a symbolic meaning, or with a republic,'' he said.


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