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Paper one shows that Liechtenstein behaved as a ‘Katzenstein small state’ whereas
Switzerland did not. Beca use their financial service s industry close d ranks and
used its privileged acc ess to the government to shape the governm ent’s response
decisively, Liechtenstein offered far-reaching bila teral deals to several major econ-
omies. Yet the Swiss elite failed to present a unite d front, which re ndered them
ineffective at fighting interna tional pressure. Their policy-makers were hopelessly
divided on how to conf ront the challenges presented over banking secrecy and in-
ternal disputes often resulted in painful and costly last-minute c once ssions. One of
the key implications of the paper is that Switzerland has become a more normal
state in the sense that important decisions are no longer made behind close d doors
between powerful representatives of business and politics. Katzenstein ( 1985)
even used Switzerland as his ‘poster child’ of a small state; small and vulnerable
yet adaptable and successful. However, in paper one, Switzerland did not act like
the adaptable and pragmatic small state that Katzenstein (198 5) had envisaged.
Whilst in the end, both countries were forced to enact change and end banking
secre cy by agreeing to the autom atic exchange of info rm ation on tax m atters, this
paper shows that they reacted in very different ways to international pressure and
that Liechtenstein was far more proactive than Sw itze rland. Liechtenstein even
joined the early adopter sta tes of the automatic exchange of information who
signed-up to undertake their first exchanges of information in 2017, whereas Swit-
zerland signe d up for the second stage and undertook their first exchanges in 2018.
The long-awaited autom atic exchange of inform ation was of high importance,
symbolically and substantively as it was important milestone in the lengthy quest
for tax transparency, but also demonstrated that lim its could be placed on state
sovereignty to overco me cooperation problem s over international taxation.
In doing so, the US and OECD exercised power and so paper one raises questions
about the legitimacy of their methods as the literature has suggested that state sov-
