German-Swiss tax evasion deal on the verge of collapse | Business| Economy and finance news from a German perspective | DW | 30.03.2012
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German-Swiss tax evasion deal on the verge of collapse

A bilateral agreement with Switzerland, expected to fill German state coffers with billions of euros, is threatening to founder at the last minute. Surprisingly, those who stand to profit most have vowed to block it.

A bilateral accord intended to settle Germany's long-running feud with Switzerland over tax evasion was said to be meeting "resistance" from some of Germany's 16 federal states on Friday, according to a spokeswoman from the German Finance Ministry.

"Several of the regional governments have told us that they are unwilling to agree to the accord," said Marianne Kothe, adding that the consequences of their action "have yet to be seen."

Germany's opposition Social Democrats (SPD) and the Green Party have repeatedly threatened to block the deal in the upper house of parliament - the Bundesrat - where Chancellor Angela Merkel's center-right coalition lacks a majority.

Norbert Walter-Borjans, finance minister in the opposition-led state of North Rhine-Westphalia, said in a statement released Thursday that Switzerland's "tiny steps" would "surely not suffice."

Swiss compromise

According to estimates, German tax dodgers have stashed away up to 180 billion euros ($240.4 billion) in Swiss bank accounts.

Following pressure from Germany, Bern has drafted legislation predicted to net German tax authorities tens of billions of euros in back payments.

Swiss newspaper Tagesanzeiger reported Thursday that on German insistence, the top tax rate had even been increased to 41 percent, from 34 percent in the original draft.

In addition, a so-called withholding tax of 26.4 percent on future income from assets in Switzerland would also be levied, the newspaper said.

A matter of tax justice

However, SPD and Green Party leaders have criticized the accord, saying it would "effectively legalize" past criminal offenses and that the taxes levied on hidden money are "too low."

"Our guiding principle remains: there cannot be an agreement that can't be explained to honest taxpayers," Walter-Borjans wrote in a statement.

In spite of the fact that more than half of the expected tax revenue windfall would go to the regional states, Walter-Borjans warned against giving up resistance.

The current draft law would not remedy "fundamental shortcomings," he said, which were a "lack of a Europe-wide strategy against tax evasion and the continuation of the Swiss banking secret."

uhe/cmk (dpa, AP, Reuters)