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Tax hatchet

September 19, 2011

Credit Suisse has agreed to settle a German tax evasion probe out of court. The Swiss bank will pay 150 million euros to prevent the prosecution of staff who allegedly helped wealthy German clients dodge taxes.

Balancing scales with cash
Credit Suisse is not the first Swiss bank to settle a tax probeImage: AP

Credit Suisse has become the second Swiss lender to reach to an out-of-court settlement that prevents the bank and its staff from being prosecuted in a German tax evasion case

The Zurich-based company announced on Monday that it agreed to make a one-off payment of 150 million euros ($205 million) to the state of North Rhine-Westphalia to end the probe. The deal comes five months after Swiss private bank Julius Baer agreed to pay 50 million euros to settle a similar case.

"Credit Suisse group and the Public Prosecutor's Office in Dusseldorf have reached an agreement regarding the proceedings against Credit Suisse employees," the bank said in a statement.

"The entire proceedings are to be resolved," it added.

The bank said the settlement meant that "a complex and prolonged legal dispute has been avoided." In addition, the deal provides "legal certainty."

Credit Suisse facade
Credit Suisse says the deal will allow its staff to get back to businessImage: picture-alliance/dpa

Unwanted attention

Switzerland's second biggest bank has been under pressure from German authorities since 2010, when investigators launched a probe of 1,100 clients and bank staff suspected of hiding funds from tax officials

Credit Suisse branches in 13 cities were raided after officials in North Rhine-Westphalia bought a computer disc containing information on wealthy Germans linked to the investigation for a reported 2.5 million euros ($3.2 million).

They were urged to come forward of their own accord to avoid prosecution, and some 12,000 had done so by late March 2010.

A spokesman for prosecutors in Dusseldorf told AFP at the time that "the Credit Suisse clients have investments in total of around 1.2 billion euros."

Authorities in the United States are still investigating whether Credit Suisse also helped Americans evade taxes.

Let's make a deal

In August, Swiss and German government officials reached a comprehensive deal aimed at ending the long-standing tax spat between Bern and Berlin.

A CD emblazoned with a Swiss flag
German officials purchased stolen data about wealthy Germans' bank accounts in 2008Image: picture-alliance/ dpa

Under the accord, Swiss banks agreed to pay 2 billion francs to German tax authorities. German taxpayers would then be given a one-off chance to make an anonymous lump sum tax payment worth between 19 and 34 percent of their assets.

Any tax revenue collected from these voluntary disclosures would be offset against the 2-illion-franc advance payment and refunded to the Swiss banks.

In the future, all investment income and capital gains linked to assets held by German taxpayers in Switzerland would be subject to a withholding tax of 26.375 percent.

Political issues

The deal, which is expected to snare almost 1,000 tax cheats, still needs to be approved by both countries' parliaments before coming into effect in early 2013.

However, some German lawmakers have already raised their opposition.

The Finance Minister of North Rhine-Westphalia, Norbert Walter-Borjans, threatened to block the deal last week.

"I will do everything to prevent the indulgence given to tax frauders," the Social Democrat minister told German news magazine Der Spiegel.

German media reports suggest tax evaders are hiding between 130 and 180 billion euros in Switzerland - an amount that translates into 54 billion euros in tax revenue for Berlin.

Author: Sam Edmonds (AFP, AP)
Editor: John Blau