April 5, 2012 2:19 pm
Switzerland and Germany amend tax deal
Switzerland and Germany on Thursday agreed changes to a tax treaty signed last summer, which will mean German tax evaders with secret Swiss bank accounts will have to pay the exchequer in Berlin more than first planned.
The amendment was forced by a number of Social Democrat-led German states, which had refused to ratify the initial agreement, forged by Wolfgang Schäuble, Germany’s Christian Democrat finance minister.
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Criticism that the agreed penalties were too low led to an increase in the tax rates German tax evaders will be able to pay anonymously to legitimise their holdings. Undeclared money will now be taxed at rates between 21 and 41 per cent, not 19 to 34 per cent, as agreed last August.
On top of that, undeclared Swiss holdings that have quietly passed from one generation to the next will fall under the top rate of Germany’s inheritance tax, a 50 per cent levy, according to German officials.
With Mr Schäuble calling the rejigged treaty a “balanced solution”, hopes were rising in Berlin and Bern that a long-running dispute about tax evasion could be brought to a close. Only last week, there was uproar in Germany when it emerged Swiss prosecutors had issued arrest warrants for German tax inspectors involved in buying stolen Swiss bank data.
The treaty is meant to meet Germany’s desire to close a big tax loophole, while fulfilling Switzerland’s determination to preserve banking clients confidentiality. It will give Germany tax income from hitherto undeclared Swiss bank accounts, while allowing account holders to stay anonymous.
While the German government has never officially named a sum, officials have said in the past that the deal could bring in about €10bn in extra tax takings, with half that sum flowing to the 16 German state governments.
Berlin hopes that the promise of extra funds will convince the country’s Social Democrat-led states, which can block ratification in the Bundesrat, Germany’s upper chamber. However, a number of state representatives have in recent days said that they would even now not back the treaty.
Switzerland’s powerful Bankers Association welcomed the signing of the amendment in Bern, and said revisions showed Switzerland had made “significant concessions” with regards to meeting Germany’s demands.
“The SBA wishes to clearly state to the German opposition that the Swiss banks would not back any further amendments,” it added.
The announcement came as speculation mounted in Switzerland about further bilateral tax agreements with other European Union countries, following the successful deal with the UK and the contested agreement with Germany. Swiss officials have confirmed Greece has sought talks, while Austria’s finance minister has expressed enthusiasm for a deal.
Bern has until now put off negotiations with other EU countries pending settlements with the UK and Germany, which have been given priority as bigger and more influential EU members. But with the deal with Berlin still very much in the balance owing to German domestic opposition, the Swiss may now be tempted to accelerate talks with others.
Beyond the penalty payments, Germans with undeclared Swiss bank accounts will in future have income and capital gains taxed at 26.375 per cent flat rate – equivalent to what they would pay in Germany.
To reassure Berlin no future accounts will go undeclared, Switzerland last summer accepted a simplified detection formula. To ensure the proceeds will meet Berlin’s expectations – and create an incentive for Swiss banks to comply – they agreed to make an initial forward payment of SFr2bn.
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Copyright The Financial Times Limited 2012.
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