Law Allows Officials to Access Bank Details | Business| Economy and finance news from a German perspective | DW | 24.03.2005
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Law Allows Officials to Access Bank Details

A decision by Germany's highest court Wednesday allowed tax and welfare offices to peek into citizens' bank accounts if they suspect fraud or tax evasion. Critics fear a breach of personal rights.


As of April 1, bank account details can be provided to tax offices

The law to "promote tax honesty," which goes into effect April 1, permits officials in Germany to identify an account holder's name, date of birth, address and the dates the account was opened and closed. Banks need only share the balance, deposit and withdrawal information when the account is not declared to investigators. The government wants to introduce this legislation because revenues from capital gains tax have fallen in recent years and an amnesty for tax dodgers introduced last year has failed to achieve the desired results.

In its decision, the German Constitutional Court rejected calls by a German bank, an unidentified lawyer, a notary, a recipient of welfare payments and a woman receiving housing subsidies that the law shouldn't take effect as it would breach citizens' personal rights.

Under legislation designed to detect money laundering, financial regulator BaFin can access information such as a customer's name and birth date and when an account is opened. The law taking effect April 1 will extend that access to tax offices, social service departments and labor agencies. It doesn't require evidence of wrongdoing or giving the client prior notification.

The Karlsruhe-based court assured that the law could only be invoked when the authorities suspect that an offense has been committed. It also stressed that citizens must also be informed of data checks after they have been carried out and at the very latest before any legal action is taken.

Steuererklärung Deutschland

Banks must only provide balance information for undeclared accounts

The Finance Ministry too has assured Germans they would be informed whenever their accounts are scrutinized. "The ruling confirms that all remaining concerns about privacy can be ignored,'' German Finance Minister Hans Eichel's spokesman Stefan Giffeler said Thursday in a press briefing. "It also shows how right it is to check bank accounts, especially after the tax amnesty."

Giffeler added, that the bank account checks are an important instrument. "They are fully in line with laws governing date protection. It is a measure that will be greeted wholeheartedly by all honest taxpayers.“

Eichel introduced a tax amnesty at the start of 2004 for a 15-month period in an attempt to crack down on tax evaders both inside and outside Germany. Income declared by the end of last year was taxed at 25 percent, while payments in the first three months of this year fall into a 35 percent tax bracket. The government had received total revenue of "slightly more than 1 billion euros" ($1.3 billion) by the end of February, Giffeler said.

Invasion of personal rights

But, despite the assurances, critics, including politicians, lawmakers, banking groups and data protection officials, fear an Orwellian-style snooping in private lives and say the law has nothing to do with tax honesty.

"There is this bogeyman being created in Germany, as if we were a country of tax evaders and that everyone has to protect their accounts," Green party financial expert Christine Scheel told German public broadcaster RBB on Thursday in response to concerns about how the law will affect people's privacy.

Privacy rights groups want to see the ministry's boundaries regarding how and when officials can look into accounts written into the law, a change German Finance Minster Hans Eichel refused.

The groups also question whether the law will enable tax offices to uncover enough irregularities to warrant the invasion into banks' traditional right to confidentiality.

"The real hard cases do not have their accounts in Germany," Dieter Ondracek, head of the German Tax Union, told the dpa news agency.

Some of the most vehement criticism of the law came from the business-friendly Free Democrat Party.

55.Parteitag der FDP in Dresden: Guido Westerwelle

FDP Chairman Guido Westerwelle

"The lifting of bank confidentiality puts every citizen with an account at any bank under general suspicion of having committed a crime," said Guido Westerwelle (photo), FDP chairman, who also called for the law to be overturned.

Legal battle continues

Even after the court's decision, which stated that the law's downsides are "less than those that would occur if the law did not go into effect," the bank and bank customer who brought the original legal challenge maintain that they will try to overturn the law by contesting its constitutionality.

This additional suit, however, could last months and until then the plantiff bank in Raesfeld called on the officials only to use their new powers only when "irrefutably necessary."

"My doubts about the law's constitutionality have not be cleared," said Peter Schaar, the Federal Commissioner for Data Protection. "People should ask their tax office for an explanation if they receive notices from the bank."

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