- Jack Elvey
Microstate with macro stakes: Liechtenstein’s gambling era
Nestled between the majestic mountains of Switzerland and Austria, the Principality of Liechtenstein has made a ‘big gamble’ after legalising casinos in 2017.
With a population of just over 38,000 and an area of only 62 square miles, Liechtenstein is one of the smallest countries in the world. Home to stunning alpine landscapes, impressive mediaeval castles and a favourable tax regime, Liechtenstein has a notable reputation at ‘stake’.
The country’s notoriety as a tax haven has burdened its reputation in recent years, sparking fears amongst locals that this will worsen with the nation’s new source of income: gambling.
The main reason why the gambling industry has taken root in little Liechtenstein is its free-market ethos. (Neighbouring Switzerland and Austria, on the other hand, restrict the number of casinos they allow). Liechtenstein levies rates of 17.5 percent to 40 percent on gambling revenue, depending on how much a casino makes. In Austria, the rate is 30 percent, and in Switzerland, it starts at 40 percent and rises to 80 percent.
Prior to 2017, Liechtenstein has taken a negative attitude towards gambling due to the nation’s Catholic majority and their concerns on the practice’s ethics. The issue of gambling continues to be a source of moral and ethical debate within Liechtenstein's society. Despite the country's recent reforms and shift towards a more liberalised economy, many individuals and groups maintain their opposition to gambling, citing it as morally unacceptable.
This stance has polarised Liechtenstein's society, with some advocating for stricter regulations and restrictions on gambling, while others argue for greater freedom and individual choice. The debate has taken on both cultural and economic dimensions, with some viewing gambling as a threat to the country's traditional values and others seeing it as a potential source of revenue and economic growth.
In 2022, taxes brought by trips made by mainly foreign visitors to Liechtenstein's casinos, generated 50 million Swiss francs ($54.51 million). With more casinos per capita than Monaco and Macau, the nation has been referred to as the “Las Vegas of the Alps.”
Despite these impressive figures, several anti-casino Liechtensteiners managed to organise a casino-ban referendum that was held in late January 2022, activated largely by pressure group IG VolksMeinung. A key member, Guido Meier, stated at a referendum discussion forum: “We don't want to establish ourselves as a casino and poker hotspot in the middle of Europe…it’s a reputation problem.”
The reputation problem has been a rather recent concern as the principality has increasingly been targeted by international authorities seeking to crack down on tax evasion and money laundering. In recent years, the country has been placed on several international watchlists, including the European Union's list of non-cooperative tax jurisdictions.
Liechtenstein's government has taken steps to address these concerns, including signing international tax information exchange agreements and implementing measures to prevent money laundering. However, critics argue that these efforts are not enough, and that the country continues to facilitate tax evasion, money laundering and other illicit financial activities.
Liechtenstein's tax laws have indeed long been a source of controversy and criticism. The country's tax system is based on a flat tax rate, which means that all income is taxed at the same rate, regardless of the source or amount. Furthermore, under the nation’s strict bank secrecy laws, banks are required to maintain strict confidentiality and are prohibited from disclosing information about their clients to third parties. This has made Liechtenstein an attractive destination for wealthy individuals and corporations seeking to avoid paying taxes or to conceal their assets.
Liechtenstein’s negative reputation has had real-world consequences with frequent tax scandals that first surfaced in 2008. Culprits from Germany, the USA, Finland, and the UK became noted tax evaders. In 2016, 5000 Brits were holding an accumulated total of £3 billion in Liechtenstein banks, with a majority of those tax-evaders facing a 10 year sentence if caught. Since these scandals, Liechtenstein remains in the crossfire of international fiscal controversy.
'Foreign casino investors should not be calling the shots | Casino ban = YES'
A further reason for pushing the Casino-Verbot (Casino ban) was that casinos in the country were and still are predominantly run by foreign operators: two by Casinos Austria International and two by Novomatic, an Austrian gambling company and slot machine maker that had been implicated in a corruption scandal back in Austria.
Casino objectors argued that money from foreign travellers to Liechtenstein was simply going into the pockets of foreign businesses. Critics have also pointed to Liechtenstein’s willingness to welcome gamblers who have been barred from casinos in neighbouring countries as a possible ethical issue.
Despite these concerns, the government of Liechtenstein, encouraged the population to vote against the proposed ban, which Deputy Prime Minister Sabine Monauni described as "too radical, too excessive." She did however point out that the country’s policymakers must follow scrupulous measures so that “we don’t turn into Las Vegas.”
The Prince of Liechtenstein himself, Hans-Adam II, also stated prior to the vote that the gambling industry is an important source of income and argued that a ban was too drastic a measure to address problems like gambling addiction.
Any plans to ban casinos were halted after the referendum in which 73.3% of Liechtensteiners said no to the casino ban. With a 70% turnout, the proponents of gambling in the microstate made sure they were heard. Whether this was heavily influenced by government advice or a general shift to more liberal economic values, it is interesting how the casino debate caused so much controversy in a nation of so few people.
The government ‘rolled the dice’ when permitting the referendum, although clearly ‘had an ace up their sleeve’ with their encouragement and prince’s concurrence.
Sabine Monauni did however announce shortly after the referendum decision on Radio Liechtenstein that “the government is planning various regulations so that the Liechtenstein market will become less attractive, and the number of casinos will still be corrected downwards.”
She further states, “there is now clarity on how to proceed with the casino issue. The No to the initiative is a Yes to a reliable and liberal business location. But it is also a yes to strict regulation and supervision in the gambling sector with a high level of player protection. The government will now continue the path already taken to limit the casino market.”