It is not without reason that this tiny independent principality nestled between Austria and Switzerland has been described as the "financial Alps."
It is probably the ultimate tax haven. It combines the conservation, political stability, neutrality and strong currency or Switzerland with a unique system of holding company, trust and foundation laws, anonymous ownership, and dedication to secrecy virtually guaranteed to keep even the most persistent foreign tax officers away.
Just in case all else fails, Liechtenstein, like neighboring Switzerland, does not consider evasion of another country's taxes a crime.
The result of this combination of man-made attractions is that within Leichtenstein's 61 square miles are sheltered more so-called "letter-drop" companies than any other acreage in the world.
In is officially estimated that at least 25,000 and perhaps as many as 40,000 such companies - basically just a mailing address and a local "representative" - are registered here. Nobody seems to know for sure the exact number.
Some of what goes on here is legal, including efforts to minimize or avoid corporate, income or inheritance tax assessments in scores of foreign countries by taking advantage of Liechtenstein's ultra-liberals laws and tax rates.
Some of what goes on is shady, specifically illegal tax evasion in a variety of creative and purposely complicated forms.
Some of it is a way to get around taboos of more public commerce, such as Arabs trading with Israelis via anonymous holding companies, or Western firms shipping sensitive technology to Communist block counties, or Persian Gulf and Mideast countries buying U.S. aircraft and paying the middleman's commission through a non-American holding company.
Some is universial hucksterism, such as the German who sold "doctor titles" to status-conscious Austrians who may have been prevented from earning them during the war - a ruse so outrageous that even the Liechtensteiners threw him out.
Most of what goes on, however, says one lawyer, is both serious and "good business."
Liechtenstein official Walter Kranz argues that firms and families legally taking advantage of the local statutes create business revenues that otherwise might not be there. "You can cry about tax havens," he says, "but perhaps they are a necessity."
He, along with Swiss bankers and some Western businessmen in Europe, say that if the funds don't go through Liechtenstein, they would go to less stable tax havens such as the Bahamas, Panama, or the Cayman Islands, to European sites such as certain Swiss cantons, Andorra or Luxembourg, or be attracted by increasingly liberal British laws pertaining to the Channel Islands.None of these, however, is viewed as having the combined safety or experience of Liechtenstein.
To understand both how this place works and its place in the European economy, one must accept the basic uncertainty that nobody knows how much money flows through here on paper and who really owns and controls it, or how much is legal and illegal by non-Liechtenstein or Swiss standards.
The two key attractions are the laws establishing companies and the tax rates.
The three unique Liechtenstein business forms are trusts, foundations and holding companies, the latter known as "anstalts" in German.
The foundations and trusts can be set up so that, with a clever lawyer, they can be put in family or church categories that do not require registration and that allow for payments to be made to beneficiaries.
Thus, says a successful lawyer here, "It is excellent for inheritance-tax avoidance, or for wealthy German, Dutch, Belgian, French and Italian families, for example, who see socialism threatening their fortunes and want to protect it for their children."
In this case, the owner, is obviously anonymous, but in all cases, Liechtenstein law prohibits divulging of any information to third parties beyond that contained in a public register. That register, however, except in the rarest cases, also contains nothing that would disclose the real owners of foundations or holding companies.
The holding companies are the major activity. Commercial foreign interests that do not do business in Liechtenstein but operate elsewhere can set up a holding company here with the single proviso that one member of the board of directors be a Liechtenstein resident and its representative agent here.
These companies are required to place certain details in the public register. But the disclosure rules are designed to cloak the identities of the real owners and the amount of the actual assets beyond the minimum assets required to create such a company.
The registration laws are perhaps the ultimate in catch-22 phraseology.
While every registered anstalt is supposed to keep proper records and financial statements, it is not required to submit them to any Liechtenstein authorities. It also doesn't have to submit to any tax declaration, and it is not subject to any audit. It is, as one lawyer says, "completely tax secret."
This means that all earnings are tax free, and that any shares issued to beneficiaries can be issued to the bearer, who thus also remains anonymous.
The system works closely with the Swiss banks, producing a double lock on identity.
In most cases, the holding companies are set up in one of the banks in neighboring Switzerland, where depositors are assured anonymity from third parties. Then the depositor's agent in the Swiss bank calls up an agent in Liechtenstein and arranges to have a holding company set up for his unnamed client.
The new company is established here and the real owners are then in business to engage in all kinds of asset transfers and new investments, using the letter-drop address here as a base for tax purposes. On the average, it costs a small holding company about $2,500 in formation costs on this end.
Holding companies whose capital is not divided into stock shares must have a minimum paid-in capital of about $15,000. In most cases, this is all these companies show on the books and is the amount on which they pay annual taxes - plus some reserves - at a remarkable rate of about 50 cents for each $500.
Firms whose capital is divided into shares must pay a tax of 4 per cent only on distributed profits.
The benefit to Liechtenstein is in the sheer number of companies.
The money for minimum capitalization must be on deposit at all times, so the three banks here have thousands of guaranteed, $15,000-minimum deposits to work with Stock-issuing varieties require a $25,000 minimum deposit.
The 25,000 to 40,000 holding companies registered here are a representative elite group of some 45 persons, including individuals and a few small law firms. Some of these Liechtensteiners represent thousands of companies, drawing as a minimum annual fee about $750 per company.
The only time the veil is pierced is when things go wrong, such as in the huge Swiss Credit Bank scandal earlier this year in which a Liechtenstein holding company - Texon-Finanzanstalt - was used by a bank branch manager to funnel lire illegally moved out of Italy through Texon and back into Italian firms that eventually ran into trouble.
The scandal also has given birth to an admission of abuses and pressures in Parliament here for some kind of reforms that would prevent another Texon fiasco or the 1976 scandal involving illegal weapons trade between Austria and the Near East.
These new proposals are expected to be presented next year and, while they are expected to keep the liberal nature of the economic system intact, as Kranz explains it, they are likely to tighten up the auditing and screening procedures. In Zurich, financial specialists are skeptical.
Though Liechtenstein has shared a customs, postal and monetary union with Switzerland since 1924, it remains an independent hereditary monarchy that is, in effect, the last surviving remnant of the Holy Roman Empire.
Some 24,000 people live in the 16-mile-long, 4-mile-wide country along the Rhine. But 6,000 to 8,000 of those are laborers from Austria, Switzerland and Italy who help man the 44 factories here - including the one that produces most of Europe's false teeth and another that turned out equipment for the U.S. space program.
"We have the highest per capita export of goods in the Europe and probably in the world," says one official, proud of Liechtenstein's performance outside the letter-drop world.