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Tentative Tax Agreement - Germany-Switzerland 2011/2013

start 14.07.2012

How the german politicians handle the tax haven role of swiss banks [p.6: 2,3,8,10]

At the state (Länder) Level, North-Rhine Westphalia (currently socialist majority) represents one end of the spectrum: the taxation authorities are supported by the cabinet in their efforts to retrieve unpaid tax dues, also if it means buying data CDs.
The cabinets of the 'richer' Länder e.g. Bavaria (liberal-conservative) and Baden-Württemberg (until recently conservative) represent the other end of the spectrum: these are not so keen that their tax investigators develop initiative to get hold of these CDs.

At the federal level (liberal-conservative majority), the buying of CDs seems to be regarded as an embarrassment, and an agreement with Switzerland is obviously designed to take the wind out of the sails of the public discussion, at the same time protect of the money laundering interests of a small minority of rich against the encroaches of the tax investigaters.

Agreement between Germany and Switzerland on Cooperation in the areas Taxes and the Finance Market [1-4]

The agreement foresees
- the regulation of future handling of tax through swiss banks: application of tax levies identical to those in Germany, and
- an absolution for the past: amount levied ~ 21-41% depending on duration and size of the investment/deposit.

The agreement was worked out behind closed doors until its announcement in September 2011 when it had to be made public to allow parliament to pass it as law. The agreement was passed by the liberal-conservative majority. The second step is a ratification by the Länder (Bundesrat). Because the Socialists have a Länder majority, the ratification is likely to be blocked.

The Swiss Parliament passed the agreement in May 2012.

Planned to come into force January 2013.

Criticism especially from the Socialists, the Greens, the Union of Taxation Employees:

- The agreement excludes a number of Liechtenstein funds possessing accounts in Switzerland that are known to be favoured by german citizens for tax evasion purposes.

- The agreement forbids german tax authorities from any investigations or prosecutions in connection with tax evasion wrt. Switzerland. Also, on-going investigations in cases in which the individuals have not yet been informed are to be stopped.

- An amnesty clause (§17) makes any information gained to date from data CDs useless.

- The swiss banks, responsible for aiding if not abetting the tax evasion in the past, are henceforth given the reponsibility of controlling the levy of taxes.

This tentative agreement very likely contains text contrary to the german constitution.

The swiss banking community is fully aware of the advantages this agreement would bring them: a video made by the Swiss Banking Union concludes with the statement "In future the customers will profit still more from the advantages of Switzerland as financial center".

The head of the Taxation Employees Union, Thomas Eigenthaler, probably hit the nail on the head when he said "There is only one way to guarantee fairness and transparency for the european taxpayer: the EU must bury the monstrance of national bank secrecy".

In contrast: How the USA handles the tax haven role of swiss banks [5-7]

Since 2007 the US tax authorities have been investigating the activities of swiss banks and their managers, as well as swiss private financial advisers in aiding and abetting rich US citizens to evade taxes by bringing their money unseen out of the country. The total sum since 1953 is estimated at $3 billion.
The investigations have led to indictments and/or demands against swiss financial actors, to date against
- several bankers working for the UBS bank (started 2007),
- various private financial consultants,
- 7 bankers working for the Credit Suisse bank (started 2011),
- the private Wegelin Bank itself*, accused of hiding $1.2 billion.
*) forcing the not-involved activities of the bank in a rescue action to be sold to the Raiffeisen Group.
Currently under scrutiny is also the (regional) Kantonalbank of Basel.

To date, a settlement was reached between the USA and the UBS:
- the bank paid a $780 million fine;
- the pressure exerted by the US authorities was sufficient to force the swiss government (against swiss law) to permit the disclosure of account data concerning 4700 US citizens.

Agreement between the USA and Switzerland on tax handling?

The Swiss government is trying to reach a general agreement with the USA with which the past is settled and a regulation for the future is found. The USA has not reacted to this quickly. The USA demands a binding agreement under which
- the Swiss government pledges itself to be cooperative in future indictments of US citizens found guilty of tax evasion;
- a lump sum (possibly in the order of $10 billion) that grants the banks absolution from prosecution for past activities.

Sources [german]:

[1] Wiki "Steuerabkommen Deutschland-Schweiz", ---
[2] Frankfurter Rundschau "Hinterziehung: Protest gegen Steuerabkommen mit der Schweiz", 23.09.2011
[3] Frankfurter Rundschau "Steuerabkommen mit der Schweiz: Schlupflöcher für Steuersünder bleiben", 24.09.2011
[4] FTD "Steuerabkommen mit der Schweiz: Etwas Angst darf bleiben ", 30.04.2012
[5] Handelsblatt "Steuerhinterziehung: USA klagen weitere Schweizer Banker an", 27.07.2011
[6] Süddeutsche "Wegen Beihilfe zur Steuerhinterziehung: USA verklagen Schweizer Wegelin-Bank", 03.02.2012
[7] Frankfurter Rundschau "Schweizer Bank: USA beschlagnahmen Millionen von Wegelin", 03.02.2012


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