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Europe

Germany and Switzerland sign landmark taxation deal

The German and Swiss finance ministers have signed a deal to give Berlin easier access to information on suspected tax fraudsters. They also agreed on further talks resolve a row over Swiss banking secrecy.

Swiss flag with euro bill

Germans have for years been hiding money in Switzerland

Germany and Switzerland have signed an agreement which will make it easier for Berlin to get information about - and tax revenue from - German tax evaders.

The agreement, signed by German Finance Minister Wolfgang Schaeuble and his Swiss counterpart, Hans-Rudolf Merz in Berne, brings to an end years of discord between the two countries. The German government believes many of its wealthy citizens have invested millions of euros in Swiss banks, and thus avoided paying tax on them.

The new dual taxation agreement is one of a series of bilateral deals that Switzerland has signed to comply with tougher international standards and new rules set out by the Organization for Economic Cooperation and Development (OECD).

The agreement will grant Berlin greater access to information on the Swiss bank accounts of Germans suspected of tax fraud.

Anonymity remains

For years Swiss law made a distinction between tax evasion, tax fraud and money laundering. The first was not a crime, the last two were. In effect, wealthy individuals from all over the world could be secure in the knowledge that if they put their money in a Swiss bank, it would be safe from the unwelcome scrutiny of the tax authorities in their countries of origin.

Bank deposit safe with Swiss flag on it

Germany badly wants the key to that bank deposit safe

Germany and the United States have long known they are losing billions in tax revenue because it's hidden in Switzerland. German media have estimated that the deal with Berne could recover up to 30 billion euros ($42 billion dollars) for Berlin.

Under the terms of the agreement signed on Wednesday, German citizens investing in Switzerland will keep their anonymity as long as they pay past and future taxes owed to Germany.

"The compensation tax payment is a sensible compromise, it gives Germany the tax income its government feels it has a right to, but it still protects the anonymity of clients of Swiss banks," Swiss professor of economics Urs Birchler of Zurich University told Deutsche Welle.

"Their individual details don't have to be given automatically to the tax authorities, and for the banks, it's a clear sign that the future will be one without laundered money, and without money from tax evasion."

Negotiations to continue in 2011

But, German Finance Minister Schaeuble had a word of warning - there is agreement, but the devil, as usual, lies in the detail.

"This agreement isn't a formal treaty between our two countries, there is still a lot of work to do. But of course it is more than a non-binding intention, it is the opening of a negotiating process, whose framework and contents are very clearly defined - so we know, very precisely, what is meant by these few lines we have signed today."

Berlin and Berne have also agreed to continue talks on the issue in 2011.

Author: Imogen Foulkes, Andreas Illmer (dpa, AFP)
Editor: Chuck Penfold

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