Press Report
Monaco Growing Despite Attacksby France and OECD
In a supplement this week, the FinancialTimes revisits the question of Monaco's relationship with Franceand the extent to which the Principality can retain its tax privilegesand its prized banking secrecy in the face of attacks from theOECD, the FATF and France itself.
Monaco wasn't in fact included in the FATF'slist of un-cooperative jurisdictions, although its lack of transparencycame in for criticism, but it was on the OECD's list of territoriesoffering 'harmful tax competition'. Given what has happened sincein the world to the OECD's initiative and the steps that Monacohas taken to tighten up on precautionary measures against financialcrime, it probably shouldn't be worrying too much about the internationalinitiatives - its problems stem more from its close relationshipwith France, the leader in the pack of militant nations seekingto protect their tax-bases and prevent their citizens from squirrelingaway assets in dark corners.
In fact, the Monagesque banking sector hasyet to show any weakness, with assets continuing to increase andnew banks continuing to arrive; but as the Financial Times says,that may simply be due to the fact that all
offshore centres are similarly threatened by the OECD's initiative.
Monaco's relationship with France has along and tangled history, although between recent French attacksand a famous occasion in 1962 when a blockade by the French gendarmerieforced Monaco to accept that French taxes would apply to Frenchnationals living in Monaco, there has been a long period of relativecalm. Last year though Monaco was the target of one of a seriesof reports on 'tax havens' issued by a particularly rabid groupof socialist deputies in the French National Assembly and waslater and, perhaps more seriously, attacked by the French FinanceMinistry.
The Financial Times quotes Patrick Leclercq,the minister of state (the equivalent of prime minister) as sayingthat the report is distorted. "The truth is, Monaco is playingthe game," he said. "There's lots of money here. Wedo not need dirty money."
In fact, Monaco has increased the size ofits financial supervisory team and has extended its laws coveringthe reporting of suspicious activity to many professions and businessactivities, including lawyers and estate agents.
Mr Leclercq is himself French, appointedunder a system which allows France to propose candidates for thetop jobs in the Principality. Even Mr Leclercq sees that thisfeudal relic is offensive to Monagesques and it is one of a numberof subjects being discussed in the ongoing negotiations betweenFrance and Monaco, which may see a reinforcement of Monaco's sovereigntybeing conceded by France in exchange for more control over itscitizens' tax affairs when they live in Monaco.
What worries Monaco the most is the fearthat the Feira agreement may lead to widespread information-sharingamong European countries. If this happens, it says, it will choose
to impose a withholding tax, as Switzerland already does, ratherthan breach banking secrecy.