Because of the underlying secrecy and confidentiality attached to parking funds in these offshore channels, governments do find it difficult to penetrate them even after marshalling all the legal approvals and resources. This was the case with the infamous Bofors scandal when the government was unable to find out who the real recipients were.
Therefore, it is safe to assume that any administration, notwithstanding its commitment and zeal to pursue the offenders, often finds it difficult to place its fingers squarely on those who are able to move funds.
But it is an open secret that, in the past, the names of some notorious Indian public servants did make the rounds for having siphoned off funds to places like Liechtenstein and Cayman Islands. Of course, they were never pursued as zealously as the German government is doing right now in the Liechtenstein episode.
Indeed, Berlin had already sounded governments the world over that it is ready to share the data it purchased from a former Liechtenstein bank official who managed to steal all the vital information pertaining to over 1,000 accounts of foreign nationals.
If the Indian government merely taps the German intelligence, Berlin would provide the information that would reveal whether any Indian public servant is also connected. A golden opportunity that New Delhi can hardly miss given the problems it has faced in the past.
The Liechtenstein affair, however, raises other questions such as the utility of tax havens that are shrouded in confidential arrangements, and also about the state of play in tax competition.
Liechtenstein is one of the smallest principalities tucked between Austria and Switzerland. In size, it may not be bigger than the south Delhi parliamentary constituency. And its population is a fraction of south Delhi's over one million figure.
Liechtenstein, which thrives on its banking secrecy and confidentiality, has repeatedly ignored the Paris-based OECD's transparency requirements. Though Switzerland has loosened some of its earlier regulations covering confidentiality provisions, Liechtenstein has refused to lower the bar despite pressure from various quarters.
Up until now, foreign tax authorities have failed to penetrate the firewall of secrecy in the principality's banks and trusts about customers and their accounts. But for an allegedly rogue employee in the LGT Group, a banking firm owned by the country's ruling dynasty, who managed to copy all the vital data on a DVD, it would not have been in the news. Once the DVD was sold to the German intelligence agency for a sum of 4.2 million euros, all the hell broke loose.
Indeed, this bizarre episode sparked off a war of words between Germany and Liechtenstein with both sides accusing each other of adopting unlawful practices in the relations of sovereign nations. The Liechtenstein's crown prince had alluded to the German government having resorted to "economic warfare" and dealing in "fenced goods", while Germany is asking for much tighter rules and regulations to cover the tax havens.
More importantly, it has revealed the vitality of the rule-of-law institutions which would not tolerate any public servant if he or she is found to have committed a white-collar crime.
The travails faced by Klaus Zumwinkel - who had turned around the Deutsche Post and later joined the joined the Deutsche Telecom as chairman on its board, because of his illegal siphoning of funds to Liechtenstein - is a grim pointer to the power and strength of rule-of-law institutions that invariably fail in booking culprits with powerful connections in many developing countries. In fact, more top managers and civil servants, rumoured to be over 500, are expected to follow suit in Germany.
This scandal has done considerable "moral damage" to Germany, said the country's finance minister Peer Steinbruck, while the chancellor Angela Merkel said the alleged actions of Zumwinkel "were beyond the imagination of many people in Germany."
Against this backdrop, it remains a mystery as to why such severe punishments are never meted to those who commit similar crimes in India or other developing countries. Apparently, China issued a "White Paper" last week to address the issue of corruption and the weakening of rule-of-law institutions.
On the other side of the Liechtenstein debate is the issue of how to deal with tax heavens. While the OECD and other powerful west European countries are insisting on initiatives to contain tax competition and force tax havens to adopt transparent disclosure procedures, analysts at the Cato Institute have argued for a hands-off policy towards Liechtenstein as they are "best governed, most stable, fastest growing and most prosperous places in the world."