Sunday, 14 October 2012

Germany, Singapore ink deal against tax evasion

File picture of the skyline of Singapore's financial district across the Singapore River (AFP/File, Simin Wang)
BERLIN — Germany and Singapore agreed Sunday to improve cooperation to clamp down on tax evasion, the German finance ministry said in a statement.

Both countries have agreed to incorporate the latest Organisation for Economic Cooperation and Development (OECD) standards on exchanging information in their double taxation accord, the statement said.

When the accord is ratified in both countries, authorities will share information about all forms of tax, not just income and capital taxes, the ministry said.

In addition, the information exchange will no longer depend on the taxpayer being resident in one of the two countries, and banking secrecy "will not constitute an obstacle to exchanging information," Berlin said.

Germany hopes to seal a similar deal with Switzerland to resolve a dispute over tax evasion and bank secrecy which has hurt relations between the neighbours.

A Swiss-German tax deal is due to take effect in January 2013 but still needs to be ratified by both parliaments.

The double taxation agreement, signed by ministers this year, would see German citizens with assets parked in Switzerland's notoriously secretive banks paying a tax rate of 26.4 per cent on these holdings.

The neighbours have been embroiled in a spat since 2010 when German authorities raided branches of Credit Suisse bank in 13 German cities after buying data on suspected tax frauds.

Switzerland reacted angrily, saying the data were stolen in violation of its banking secrecy laws.

As much as 180 billion euros ($233 billion) in German assets are deposited in Switzerland, according to unconfirmed media reports.

According to a report in Der Spiegel news weekly Sunday, tax authorities in the state of Rhineland-Palatinate are preparing to purchase another disc.

Monday, 8 October 2012

Electioneering threatens German tax deal

Patrick Odier of the Swiss Bankers Association and State Secretary Michael Ambühl recently tried to convince German senators of the accord's virtues
Patrick Odier of the Swiss Bankers Association and State Secretary Michael Ambühl recently tried to convince German senators of the accord's virtues (Keystone)
by Peter Siegenthaler,

The German-Swiss tax deal aimed at legalising undeclared assets held by German citizens in Swiss banks may not face a referendum in Switzerland, but there are no guarantees the accord will be ratified by Germany’s Senate with elections looming.

Media in both countries noted that after backers of a referendum against the so-called Rubik accords with Germany, Britain and Austria failed to gather enough signatures to force a vote, it was a sign that most Swiss agreed with the deals.
The Neue Zürcher Zeitung’s Berlin correspondent wrote that this result was welcomed in German government circles, adding that there was  “coalition of common sense” in both countries that recognised the advantages of the accord.

Any danger for the deal does not lie within the cabinet in Berlin, nor in the lower chamber of parliament, where the majority is safely in the hands of the government coalition, but in the Senate, which is the chamber where Germany’s federal states are represented and is dominated by the centre-left and the Greens.    

This majority seems intent on refusing the accord, according to Bonn University political scientist Gerd Langguth.

“The Swiss ambassador to Germany has been extremely active and has been trying to talk to all parties involved, but the Senate majority is unlikely to change its position,” he told

Langguth points out that with elections looming, the centre-left Social Democrats are not just going to oppose the treaty, but will also take the opportunity to score points against Chancellor Angela Merkel’s government.

“If the opposition can get some mileage out of an issue, such as this tax accord, they will seize the opportunity,” the political scientist points out. “In Germany, there are plenty of people who are opposed to Swiss banking secrecy as they feel the state has been cheated.”

The treaty would legalise the undeclared Swiss bank accounts held by Germans citizens. Swiss banks would deduct a one-off levy for backdated assets and then impose a withholding tax on future income earned for those account holders who do not want to reveal their identities to the German authorities.

With the Social Democrats sensing that tax justice interests voters, they have made it into an election issue. A number of federal state premiers, as well as the official candidate for the Chancellery, Peer Steinbrück, have repeated in the past few days their opposition to the accord.

After being nominated, Steinbrück warned that the Swiss must do more to fight German tax evasion, adding that it was an issue of German – and not Swiss - sovereignty. He pointed out that tax evasion was not considered a minor offence by the Social Democrats.

No backing down

Langguth says that it is unlikely the Senate majority will back down, even if in theory it is possible to hammer out a deal that both chambers of the German parliament could accept with the government acting as a facilitator.

Normally this would involve some horse trading with the federal states to reach some kind of agreement, as has been the case in the past.

But for Langguth, this is not really an option. The Social Democrats have nailed their colours to the mast and left no room for negotiation, he says. Enough to doom the accord with the Swiss.

According to the German-language correspondent for Swiss public radio in Berlin, government sources have confirmed that a new deal is being negotiated by diplomats, but also that a revised accord would demand a significant new concession from Switzerland.

The original tax agreement was already upgraded in Spring. Swiss President Eveline Widmer-Schlumpf has repeated recently that there would be no further concessions and that the text of the treaty should not be modified.

Any discussions taking place now would be to find ways of preventing Germans who hold undeclared assets in Switzerland from moving them to another location. Any solution would however have to avoid involving any major changes to the Swiss position, a situation that leaves little room for discussion, according to the radio correspondent.   

The Swiss foreign ministry still hopes a majority of the German federal states will accept the accord as it is.

In a statement, it writes that most of the states dominated by the Social Democrats have yet to determine their position on the deal, adding that the German government is backing the agreement strongly and believes ratification is possible.

Peter Siegenthaler,
(Adapted from German by Scott Capper)

Missing bank data found in Greece

Greece has located a CD of Swiss banking data it bought two years ago
Greece has located a CD of Swiss banking data it bought two years ago (Keystone)

Authorities in Greece have found a missing data CD containing the names of Greek clients with Swiss bank accounts, paving the way for Athens to prosecute tax evaders.

The head of the Greek financial police, Stelios Stasinopoulos, reportedly handed the data over to the country’s chief prosecutor on Tuesday. It took the Greek government almost a week to locate the CD, with the support of intelligence agencies and two former finance ministers.

The CD, which the Greek government acquired in 2010 via then-French finance minister Christine Lagarde, was originally obtained by a worker at the Geneva branch of the bank HSBC along with other data pertaining to Greek clients. It contains the names of roughly 2,000 Greeks with money in Swiss banks.

Greek authorities long believed that they would no longer be able to use the data on the CD, even if it were to be found. Just two weeks ago, acting finance minister Giorgos Mavraganis told Greek parliament that using the data would amount to “industrial espionage”.

However, on Monday, Greek finance minister Yannis Stournaras told the Financial Times newspaper that his government would make catching tax evaders a top priority, with the help of the CD obtained in 2010. He then said that if the CD could not be found, the Greek government would ask its “European partners” for help in finding another copy.

Stournas also said that more than 30 Greek politicians and department heads were under investigation for tax fraud and corruption. Those names were recently made public in the press, and the president of Greek parliament, Evangelos Meimarakis, stepped down temporarily as a result.

Greece and Switzerland are currently working on a tax accord that resembles agreements the Swiss have already struck with Germany, Austria and Great Britain. The accords, known as Rubik agreements, generally place a flat tax on foreign money in Swiss bank accounts, making it possible for Switzerland to maintain its banking secrecy while the foreign government in question can collect taxes due to it.

The tax deals with Austria and Great Britain have been ratified by all parties involved, but the agreement between Switzerland and Germany must yet be ratified by Berlin. A Greek-Swiss tax agreement is still in the negotiating phase. and agencies

Cabinet moots further easing of banking secrecy

Domestic tax authorities could also get easier access to bank data of tax dodgers
Domestic tax authorities could also get easier access to bank data of tax dodgers (Keystone)
by Urs Geiser, and agencies

The government has launched a lengthy process to grant cantonal authorities access to bank client data in a bid to crack down on suspected tax evasion. The move could lead to a further weakening of traditional banking secrecy rules.

More than three years after Switzerland loosened banking secrecy in line with international standards, the cabinet on Friday decided to reform the criminal law on tax issues.

Switzerland currently allows domestic authorities access to bank accounts only in cases of suspected fiscal fraud. However, tax evasion - when citizens fail to declare their income or wealth – is considered merely a civil offence and is punished by a fine.

The finance ministry has been mandated to present a detailed draft by next spring which will then be submitted to political parties, organisations and pressure groups. At a later stage parliament is discuss the proposals.

The reform of the penal law is aimed at eliminating loopholes and simplify and streamline the tax system, according to a cabinet statement.

Experts say the reform could also create a level playing field between foreign and domestic tax authorities trying to crack down on tax cheats.

The announcement met mixed initial reaction from the main political parties, the cantons and the banking industry.

The rightwing Swiss People’s Party vowed to fight against an easing of banking secrecy, the centre-right Radicals and Christian Democrats warned against lifting the distinction between tax fraud and tax evasion. The centre-left Social Democrats for their part welcomed the plan as step in the right direction.

The 26 cantons, which have wide-ranging autonomy, also came out in favour, while the Swiss Bankers Association warned of putting tax fraud and tax evasion on the same level.

OECD standards

Under growing international pressure on tax havens, the cabinet in March 2009 agreed to abolish the distinction between tax fraud and tax evasion in line with the Organisation for Economic Co-operation and Development (OECD), paving the way for the exchange of information with other countries in individual cases and based on legal requests.

Over the past few years, Switzerland has re-negotiated more than 40 double taxation accords with other countries.

Tax issues have been high on the agenda in talks with the United States but also with neighbouring Germany, France and Italy as well as with the biggest Swiss trading partner, the European Union.

The weakening of Swiss bank secrecy has been a big blow to the world's largest offshore centre with $2 trillion (SFr1.86 trillion) in assets.

The country’s largest bank, UBS, said it expects Swiss banks to see European clients withdraw "hundreds of billions of francs" as a result of steps to stop foreigners using secret accounts to evade taxes.

Urs Geiser, and agencies

Parliament allows controversial tax assistance

Finance Minister Widmer-Schlumpf defending the reform in parliament
Finance Minister Widmer-Schlumpf defending the reform in parliament (Keystone)
by Urs Geiser,

Parliament has approved grouped requests for administrative assistance on tax matters in line with international standards - further weakening Switzerland’s banking secrecy law. The move follows pressure to crack down on tax evasion.

The House of Representatives decided to follow the Senate in giving other countries information about suspected tax dodgers based on patterns of behavior by account holders or financial institutions.

Under the current law, assistance is only granted in individual cases and if suspects are identified by name.

During Wednesday’s debate, representatives of the rightwing Swiss People’s Party warned approval of the new standards was tantamount to giving up banking secrecy rules altogether.

“We are paving the way for random inquiries and thereby drive away the last foreign clients from our financial centre,” said Caspar Baader.

However, supporters of the reform, mainly members of centre-left parties, however argued Switzerland would be blacklisted if it refuses to implement rules decided by the Organisation for Economic Co-operation and Development (OECD) in July.

Green Party parliamentarian Louis Schelbert said there was no point trying to defend banking secrecy in the long run.

The centre-right approved the reform grudgingly. “There is nothing we can do to stop group requests,” said Thomas Maier of Liberal Green Party.


Despite calls to apply the amended law retroactively the house did not discuss such a proposal. It could have helped appease opponents of a planned deal with Germany aimed at recovering untaxed assets in Swiss banks, according to commentators.

Finance Minister Eveline Widmer-Schlumpf said the law would come into force next January and Switzerland would have to adapt some double taxation agreements (DTA) with other countries.

The cabinet initially tried to explicitly exclude group requests, but changed its mind following international pressure.

Peter Kunz, professor of economic law at Bern University, says the decision by parliament leaves some scope both for the government and for the courts.

“German account holders are likely to challenge implementation of the law by January 1,” he says.

Fishing expeditions

Kunz is also wary about the legal definition of group requests compared with random and speculative inquiries known as fishing expeditions.

“There is no clear distinction between the two from a legal point of view,” he told

The Swiss Bankers Association in July welcomed the differentiation.

“Group requests will be subject to specific criteria. In particular, the affected group must be clearly defined and an explanation specifying the concrete facts of the case is necessary in order for a group requests to be made,” a statement said.

The Neue Zürcher Zeitung newspaper welcomed the agreement but cautioned against violating basic legal tenets.

“It is correct to take a pragmatic stance to deal with fiscal legacies. But Switzerland must not ignore its constitutional principles and lose its dignity,” an editorial in Thursday’s edition said.

The newspaper said Switzerland had no choice but to grant Germany the same conditions it had agreed with the United States.

However, the NZZ questioned whether the parliamentary decision will pay off. Be it in Germany, where parliament is still to debate the tax deal with Switzerland, or at a domestic level, where opponents are challenging the accord to a nationwide vote.

Urs Geiser,
(With input from Andreas Keiser)

Birkenfeld reward may tempt other bankers

UBS whistleblower Bradley Birkenfeld was released from US prison last month.
UBS whistleblower Bradley Birkenfeld was released from US prison last month. (Keystone)
by Simon Bradley,

The record $104 million (SFr97.6 million) given by the United States to a whistleblower in a tax fraud case against the Swiss bank UBS is another defeat for Switzerland and may entice other bankers to follow suit, the Swiss papers agree.

Whistleblower Bradley Birkenfeld is credited with exposing widespread tax evasion at Swiss bank UBS. Birkenfeld served two-and-a-half years in prison for a fraud conspiracy conviction related to the case, which resulted in a $780 million fine against the bank and an unprecedented agreement requiring UBS to turn over thousands of names of suspected American tax dodgers to the Internal Revenue Service.

On Tuesday many Swiss papers led with stories about the size of Birkenfeld’s reward and its potential impact for Switzerland.

“Rich picking for a thief,” headlined the Basler Zeitung.

“Bradley Birkenfeld hits the jackpot in the United States,” said the French-speaking 24Heures newspaper.

The Blick tabloid newspaper said the case was not contradictory but showed “it’s possible to be both a perpetrator and a witness. More importantly, it proves how ruthlessly US officials are pursuing tax evaders and how determined they are to dry up tax havens.”

Zurich’s Tages-Anzeiger went further describing it as a “seductive offer for bankers”.

“This enormous reward show how the US are raising the stakes in their tax fight with Switzerland…in promising such high compensation the IRS are hoping that more incriminating material is handed over,” Zurich’s Tages-Anzeiger wrote.

The French-speaking daily Le Temps agreed that Birkenfeld’s huge reward could encourage other bank employees to follow his example.

“Those Swiss bank employees whose names were handed over to the US authorities by their banks now know how generous the US tax services can be to those who help them hunt tax cheats,” it wrote.

Whistleblowing habits “may be changing”

Eleven Swiss banks are currently under investigation by US authorities looking into allegations the banks helped Americans evade taxes.

Some 10,000 files have been relayed to the US Department of Justice containing written correspondence and notes of telephone calls made between bank staff and US clients. Some of this data has been used to identify specific bank staff.

Swiss bank employees, fearful of how the decision to hand over data could affect them, have begun legal proceedings against banks and the government.

Whistleblowing is not part of Swiss culture, Le Temps declared, but the bad feeling among the bank employees affected is such that habits “may be changing”.

The French-speaking daily said the reward was clearly another a defeat for the Swiss banking industry.

“It weakens the already uncomfortable position of the eleven banks that are trying to escape the clutches of the US justice and tax authorities…and limit the fine that they will inevitably have to pay,” it declared.

Tide turns for transparency

After several affairs involving CDs of stolen bank data bought by Germany, the nine-figure reward shows to what extent “tax transparency is not an option but a necessity for the entire finance industry”.

“Birkenfeld was a blessing for the Swiss financial industry,” the Blick commented. “He only sped up what was to come anyway – a transition from “dirty” to “clean” money. Bank secrecy has run its course for tax evaders, but it is worthy of protection for an open society that wishes to provide financial privacy for honest customers.”

Tages-Anzeiger concluded that the move to grant such huge compensation was “completely in line with the Obama administration’s strategy against international tax evasion and its use of Switzerland in its election campaign as an example of a dubious tax location”.

“If Obama is re-elected the Swiss government should brace itself for the US to become even less open to compromise,” it declared.

The Basler Zeitung was more critical: “Clearly Switzerland is being made to understand that the tried-and-tested practice of investigations, threats and blackmail will continue like before.”

The paper advised the government to break off ongoing tax discussions with the US and “at the worst allow things to develop into a confrontation. Maybe then the US justice or foreign ministries will bring the IRS to terms.”

The NZZ newspaper was equally critical of what it saw as “absurd methods” to track tax dodgers whereby a "crook out for revenge steals vast amounts of protected data for money" and is finally rewarded with $104 million as a hero.

The state thus turns into a “receiver of stolen goods and incites its citizens into illegal activities and betrayal” and in so doing “the rule of law and above all morals” are left on the sidelines, it concluded.

Simon Bradley,

UPDATE 1-Still hope for German-Swiss tax evader deal -Schaeuble

(Adds detail, background, quotes, SPD reaction)

(Reuters) - A deal between Germany and Switzerland to crack down on tax evaders is imperiled by an opposition party that says it does not go far enough, but German Finance Minister Wolfgang Schaeuble said on Tuesday he still hopes to get it approved.

Switzerland and Germany struck a deal in April to levy taxes on the assets that Germans have stashed in Swiss accounts to avoid the taxman but the opposition Social Democrats (SPD) party has said it will block the plan in the upper house of parliament, the Bundesrat, where the governing centre-right coalition has no majority.

The existence of the Swiss accounts has caused an uproar in Germany where the SPD-ruled state of North Rhine-Westphalia, Germany's most populous, has purchased CD discs containing bank data from whistleblowers to track down tax evaders who attempt to move their money before the deal comes into effect, planned for early next year.

Last weekend, senior SPD member Joachim Poss said his party would scupper the tax deal regardless of whether Switzerland makes concessions to allow back-dated inquiries, but Schaeuble said he thinks the deal with the Swiss is as good as it can get.

"I hope very much that we still manage to get it ratified," Schaeuble said as he opened a debate on Germany's 2013 budget in the Bundestag lower house.

"We have an agreement with Switzerland which means that in the future we will treat assets in Switzerland like those in Germany - you cannot reasonably want any more than that."

Until now, one of the SPD's criticisms has been that, as it stands, the pact would allow people to evade taxes by taking their money out of Switzerland before the deal takes effect.


The Swiss and German governments have already renegotiated the deal once, deciding in April to raise the retroactive levy on German funds held in Swiss bank accounts in an attempt to placate the SPD.

"Even in (the agreement's) renegotiated form, tax evaders are still protected and shrouded by anonymity," the SPD's Poss told the Bundestag during Tuesday's debate.

"They can still transfer money that has not been taxed to Switzerland and that, Mr Finance Minister, is a provocation of honest taxpayers," he said.

German media have accused Swiss banks of telling German clients to shift money to Singapore to avoid taxation.

Schaeuble said that without the deal, there would be nothing to prevent money from "sneaking out" of Switzerland.

Norbert Barthle, the budget expert for Chancellor Angela Merkel's Christian Democrats (CDU), urged the SPD to ensure that their state premiers did not block the deal.

"Then we would have more tax revenues - experts say around 10 billion (euros) ($12.85 billion), which we could rake in immediately and we would use that to reduce net borrowing," said Barthle.
Germans hold an estimated 150 billion euros in Swiss accounts.

Banking secrecy is key to Switzerland's $2 trillion offshore wealth management industry. It has refused an automatic exchange of information on account holders and is pursuing instead the strategy of a withholding tax to preserve secrecy. ($1 = 0.7821 euros) (Reporting by Michelle Martin, Sarah Marsh and Alexandra Hudson; Writing by Michelle Martin, editing by Gareth Jones and Michael Roddy)