A law that reveals Germans' bank account information to tax offices went into effect Friday and the end of an associated tax amnesty resulted in some people transferring funds to the open arms of Austrian banks.
A piggy bank is the only place to hide money from tax officials now
Even though the new German "Law for Tax Honesty" would not reveal an account's balance, deposit or withdrawal information, investigators can find out account owners names and addresses along with an account's opening and closing dates, provided they have good reason to do so.
"It is good news for all honest taxpayers," Barbara Hendricks, a deputy finance minister, said in a statement last week.
Though Germans are typically thought to fill out every form in minute detail, tax offices estimate evasion through misleading filings cost the government millions of euros every year. The government has not announced how much tax revenue it hopes to recoup using the new law.
Law trades amnesty for prosecution
Tax evasion is estimated to cost Germany millions in lost revenue
A 15-month tax amnesty law, aimed at bringing money in foreign banks back to Germany, brought 1.2 million euros ($1.55 billion) into the treasury's coffers, much less than the 5 billion euros German Finance Minister Hans Eichel had hoped.
The new law for tax honesty, which began as a way of combating money laundering for terrorism after Sept. 11 attacks in the United States, developed a central processing system that allowed government investigators a look at account data in the country's 2,400 banks.
As quick as Google?
Tax investigators as well as social and welfare officials now will be able to use the system to determine what types of accounts a person has.
"Now it's like Google," said Thomas Schluter, a spokesman for the Federal Association of German Banks. "They put in a name and date of birth, and out comes the information."
Government officials say the process is much more arduous and is closely monitored.
Former German tennis star Boris Becker was sentenced to two years' probation for tax evasion and fined for 300,000 euros in 2002
When an account sparks investigators interest, the first step is to confront the owners with their suspicions, allowing them to answer the inquiries.
If investigators remain apprehensive, the next step is to fill out the required form, either by hand or with a typewriter, get a supervisor's signature and post the form to a central agency in Berlin
"A clerk who does this much work, only does it when he has a good reason for it," Nikolaus Gross of Munich's main tax office told the Süddeutsche Zeitung Friday.
German funds deposited abroad
Competitive pressure from other international banks is leaving some German institutions wondering if they'll lose customers to Switzerland, Luxembourg and Austria.
"It's a clear weakening of Germany's status as a financial center," Hermann Burbaum, head of the Volksbank Raesfeld, who challenged the law in Germany's highest court last week.
Switzerland's UBS bank won't be a safe haven for German funds when EU rules go into effect
Austrian newspapers estimate that Germans have deposited between 50 billion euros and 70 billion euros in the southern neighbor, where they are more than welcome.
"We all profit from this," Austrian-state bank Association head Josef Kassler. "And we don't even have to advertise much for it."
Still, Austria and other European countries will only be a temporary solution for wealthy Germans looking to avoid the 42-percent top tax bracket.
Starting July 1, the European Union plans to force member states, and associated countries like Switzerland, to share bank details about nonresident customers to their home countries.