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Posted on Mon, Nov. 02, 2009

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Tax Haven Vacation: Little Luxembourg And Other Offshore Banking Spots Need Your Help

By Ellen Creager

Detroit Free Press

LUXEMBOURG — Sadly, being a world tax haven isn't what it used to be. All those nasty new disclosure laws. Uncle Sam snooping into private bank vaults. Euro powers whining about tax evaders. Suddenly, the party's over in offshore banking glamour spots like Luxembourg and Switzerland.

Not to worry. I'm here to help.

Not with my millions — with my tourist dollars.

My new policy? Take a tax haven vacation today, and keep these little places afloat.

A tax haven — also called an offshore banking center — is a country with banking laws so lenient that depositors earn money tax free in total secrecy.

Traditional European tax havens are in picturesque nations so cute they could be in a storybook — Luxembourg, Liechtenstein, Andorra, Monaco, San Marino, Switzerland — and so small you have to park your Mercedes in the next country.

But this fall, these banking secrecy spots suddenly became secret no more. Bowing to international pressure, all have agreed to rat out investors to the tax man. Poof! End of an era.

Concerned about its very survival, I hurry to offer my support to the Grand Duchy of Luxembourg.

I'm determined to help out this little nation, which may have the highest per-capita income in the world of $79,000 but whose heart is undoubtedly aching.

First up, I spend $169 a night for a basic room at the Mercure across from the train station in the capital city, which also is called Luxembourg. Then I spend $4 on a cafe latte. And $5 on a bag of chips, $5 on a Sprite from the mini-bar, $20 on a pretty good bus tour around the city and $1.50 on a city brochure from the tourist office.

Surprise! From the upper deck of the tour bus, I notice no unemployment lines. No frayed Hermes scarves or rumpled cashmere. Luxembourg, it seems, is not only wealthy in cash, but also in the looks department. How well it hides its pain!

It has a Euro-fairy-tale vibe, with 12th-century fortifications that date from its days as a fortress city. It has cobblestones older than Cinderella. It has a tasteful palace where the country's royal family, led by the hunky Grand Duke Henri, lives when in town. It has three incredibly beautiful arched bridges that connect two sides of town over a deep green valley.

The tiny nation that borders Belgium, Germany and France has a quaintly small population of just 440,000.

It also has 151 foreign banks, 9,000 holding companies and is the eighth-largest lender to the United States.

The next morning, I make my way to Luxembourg's Le Musee de la Banque — the Bank Museum. It is housed in what looks like a turreted castle but which actually is the original 1912 headquarters for Banque et Caisse d'Epargene de l'Etat Luxembourg — the original savings bank of the nation.

I'm the only visitor, which is too bad, because it's free and interesting. From a tiny bank that took care of depositors' money like a "careful father," its history states, it grew into a world powerhouse, especially in the past 20 years.

Displays of money, banking inventions and its vault are captioned only in French, but it is easy to grasp the story here — Luxembourg has been a pillar of discreet, tax-free banking for quite awhile.

So I do think about trying to open a bank account . Maybe 100 bucks. Just a little something to help out . But then I read the rules. You need certified copies of your passport. And a reference from your current bank. And a utility bill showing your address.

None of which I have brought.

Anyway, which bank would I choose? There are so many! Banks I've never heard of! Private banks! And other kinds of mysterious financial companies! Most of those are marked by little gold labels on mailboxes, sometimes 10 names on one box.

I walk past so many of these buildings and so many of these company offices that I start picturing bars of gold towering in closets, anterooms, lobbies, attics and basements all over Luxembourg. That's why they need all the stone fortifications, probably. To keep the city from sinking. But, of course, that's ridiculous. Any private banker could tell you that it's all computerized now.

Anyway, by tomorrow they'll probably even record my expenditures in town and notice that, yes, a dumb American tourist spent $5 for a Sprite.

Cha-ching! Somehow, I realize, Luxembourg will survive.

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OFFSHORE BANKING CENTERS

The billionaires are suffering! Support your favorite offshore banking country by visiting as a tourist. The Organization for Economic Cooperation and Development keeps an ever-changing world list, but here are 10 well-known scenic offshore banking centers and their tourist Web sites:

Luxembourg: www.lcto.lu

Liechtenstein: www.tourismus.li

Andorra: www.andorra.ad

San Marino: www.visitsanmarino.com

Monaco: www.visitmonaco.com

Switzerland: www.myswitzerland.com

British Virgin Islands: www.bvitourism.com

Bahamas: www.bahamas.com

Bermuda: www.bermudatourism.com

Cayman Islands: www.caymanislands.ky

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IF YOU GO

GETTING THERE: Most visitors take the train from Paris; Brussels, Belgium, or Frankfurt (about $60 each way if bought in advance at www.raileurope.com).

MONEY: One euro equals approximately $1.50.

LODGING: Stay at a hotel near the old town or train station. Avoid staying in Kirchberg district; it's in a maze of office and European Union government buildings and away from the charm. The Mercure Grand Hotel Alfa (www.mercure.com, $121-up) is adequate, but if you want to upgrade, try the Sofitel Grand Ducal (www.sofitel.com, $221-up).

ATTRACTIONS:

Bank Museum (Musee de la Banque) tells the interesting history of banking in Luxembourg and how it evolved from a paper-and-pencil enterprise into a high-tech global business. (1 Place de Metz, free, weekdays 11 a.m.-5:30 p.m., www.bcee.lu.)

City Sightseeing Luxembourg bus tour. I recommend this excellent hour-long audio-narrated tour. It takes you from the scenic center out to the Kirchberg and Quartier du Klem districts, the new financial services neighborhood and European Union office complexes. It leaves from Constitution Square. You can hop on or off at any of eight stops, and the ticket is good for 24 hours. (www.sightseeing.lu, about $20.)

Historical city center. Fairy-tale-like buildings on the edge of a precipice (actually, the Petrusse Valley) make for great photographs. It's easy to walk around because the historical city center is small.

RESTAURANTS: Luxembourg has 11 Michelin-starred restaurants, more than any other country per capita. I didn't eat in any of them. For upscale dining, try the restaurants near the palace or in the Kirchberg district. Try that old Luxembourg specialty "Judd matt Gaardebounen" (smoked pork and broad beans) at Alfa Brasserie across from the train station.

SHOPPING: Villeroy & Boch porcelain was invented in Luxembourg; see the big store in the city center at 2 rue du Fosse.

FOR MORE: www.visitluxembourg.com

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Ellen Creager: ecreager@freepress.com