tax evasion
Wall Street Journal, February 7, 2010
Zurich - German officials said they were weighing fresh offers from informants after deciding last week to pay €2.5 million ($3.4 million) for the names of suspected tax evaders in what is rapidly evolving into a broad attack on Switzerland's system of banking secrecy.
Over the past week, German officials have launched a tactical and rhetorical assault on Swiss banking, a strategy that appears to be aimed at undermining both Switzerland's tradition of secrecy and its pre-eminence as a tax refuge. In addition to agreeing to purchase the data, a move Switzerland vociferously protested, Germany signaled it would likely share whatever information it secures with other countries.
A poster in Zurich protesting Germany's agreement to buy secret Swiss bank data from an unidentified informant shows German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble.
"There's no future for bank secrecy," German Finance Minister Wolfgang Schäuble said in a Saturday interview with German newspaper Süddeutsche Zeitung. "It's finished. Its time has run out."
Authorities from the German state of North Rhine-Westphalia, where the data had been offered, reached a deal in recent days with a confidential informant to acquire an initial trove of secret Swiss banking data, a German official familiar with the investigation said over the weekend. The records, which authorities said originated from a Swiss bank, include account details of some 1,500 Germans suspected of using the Swiss accounts to hide undeclared money.
German finance officials, who have reviewed samples of the data set, now believe the information could yield €400 million in back taxes, more than double initial estimates, according to the official. The German Tax Union, a labor union for tax collectors and finance officials, estimates that tax evasion-including hiding money abroad and other unreported income-costs the German government some €30 billion in lost revenue annually.
The prospect of similar tax bonanzas is spurring German authorities to consider additional offers from unidentified hackers or thieves. Over the weekend, officials in the southern German states of Bavaria and Baden-Württemberg said they also were reviewing offers of banking information from Switzerland, but didn't provide any details about the sources. The Netherlands, Belgium, Austria and other European countries quickly clamored for access to any data that Germany buys.
The German government is increasingly making clear that the endgame in its negotiations with informants is to upend Switzerland's system of banking secrecy altogether. Under pressure from the U.S. and other countries, particularly in Europe, Switzerland recently agreed to water down its banking secrecy laws. But Germany in particular has frequently complained that its small Alpine neighbor has been slow to cooperate with foreign tax authorities and continues to offer itself as an attractive haven for tax cheats.
Swiss officials, in their condemnation of Germany's moves to procure the stolen data, acknowledge that the development could more broadly destabilize the country's private banking system.
"We find the development simply difficult, worrying," Swiss President Doris Leuthard said on Swiss national television over the weekend. "If one buys, it makes it more attractive, it makes it a business and that creates more of a market." A Swiss finance ministry spokesman reiterated that if the data were stolen, they should be returned.
The German government has launched a campaign in public and in private over the past week to maximize pressure both on Switzerland and on tax-evading German citizens. A German finance official said tax accords and other treaties with other countries would likely enable Germany to share whatever Swiss bankingdata it secures.
German authorities have remained tight-lipped on which bank or banks may be the source of the data they are reviewing, allowing no German citizen with money hidden in a Swiss bank account to feel at ease. The tactic appears to be having some effect. Over the weekend, tax agencies across Germany reported that a number of tax dodgers have turned themselves in and agreed to pay back taxes to avoid prosecution.
An official familiar with the investigations said investigators in three German states are examining account records hacked or stolen from UBS AG, HSBC Holdings PLC and Julius Baer Group. All three banks declined to comment on what they called speculation.
Though the U.S. used information from a whistleblower to pressure Switzerland into handing over the names of some U.S. taxpayers with secret Swiss accounts last year, the confrontation with Germany represents a bigger threat to the Alpine nation's Swiss tradition of bank secrecy. German officials say the country's taxpayers, who are required to pay relatively high taxes, have about €175 billion in Swiss bank accounts, or more than 10% of Switzerland's estimated $1.8 trillion offshore-banking business.
Switzerland has suggested an international agreement under which banks would levy a withholding tax on foreign account-holders and send the funds back to their home countries. But a number of European countries, sensing that Bern is on the defensive, are pressing for Switzerland to agree to a full exchange of information on foreign account-holders.
Zurich - German officials said they were weighing fresh offers from informants after deciding last week to pay €2.5 million ($3.4 million) for the names of suspected tax evaders in what is rapidly evolving into a broad attack on Switzerland's system of banking secrecy.
Over the past week, German officials have launched a tactical and rhetorical assault on Swiss banking, a strategy that appears to be aimed at undermining both Switzerland's tradition of secrecy and its pre-eminence as a tax refuge. In addition to agreeing to purchase the data, a move Switzerland vociferously protested, Germany signaled it would likely share whatever information it secures with other countries.
A poster in Zurich protesting Germany's agreement to buy secret Swiss bank data from an unidentified informant shows German Chancellor Angela Merkel and Finance Minister Wolfgang Schäuble.
"There's no future for bank secrecy," German Finance Minister Wolfgang Schäuble said in a Saturday interview with German newspaper Süddeutsche Zeitung. "It's finished. Its time has run out."
Authorities from the German state of North Rhine-Westphalia, where the data had been offered, reached a deal in recent days with a confidential informant to acquire an initial trove of secret Swiss banking data, a German official familiar with the investigation said over the weekend. The records, which authorities said originated from a Swiss bank, include account details of some 1,500 Germans suspected of using the Swiss accounts to hide undeclared money.
German finance officials, who have reviewed samples of the data set, now believe the information could yield €400 million in back taxes, more than double initial estimates, according to the official. The German Tax Union, a labor union for tax collectors and finance officials, estimates that tax evasion-including hiding money abroad and other unreported income-costs the German government some €30 billion in lost revenue annually.
The prospect of similar tax bonanzas is spurring German authorities to consider additional offers from unidentified hackers or thieves. Over the weekend, officials in the southern German states of Bavaria and Baden-Württemberg said they also were reviewing offers of banking information from Switzerland, but didn't provide any details about the sources. The Netherlands, Belgium, Austria and other European countries quickly clamored for access to any data that Germany buys.
The German government is increasingly making clear that the endgame in its negotiations with informants is to upend Switzerland's system of banking secrecy altogether. Under pressure from the U.S. and other countries, particularly in Europe, Switzerland recently agreed to water down its banking secrecy laws. But Germany in particular has frequently complained that its small Alpine neighbor has been slow to cooperate with foreign tax authorities and continues to offer itself as an attractive haven for tax cheats.
Swiss officials, in their condemnation of Germany's moves to procure the stolen data, acknowledge that the development could more broadly destabilize the country's private banking system.
"We find the development simply difficult, worrying," Swiss President Doris Leuthard said on Swiss national television over the weekend. "If one buys, it makes it more attractive, it makes it a business and that creates more of a market." A Swiss finance ministry spokesman reiterated that if the data were stolen, they should be returned.
The German government has launched a campaign in public and in private over the past week to maximize pressure both on Switzerland and on tax-evading German citizens. A German finance official said tax accords and other treaties with other countries would likely enable Germany to share whatever Swiss bankingdata it secures.
German authorities have remained tight-lipped on which bank or banks may be the source of the data they are reviewing, allowing no German citizen with money hidden in a Swiss bank account to feel at ease. The tactic appears to be having some effect. Over the weekend, tax agencies across Germany reported that a number of tax dodgers have turned themselves in and agreed to pay back taxes to avoid prosecution.
An official familiar with the investigations said investigators in three German states are examining account records hacked or stolen from UBS AG, HSBC Holdings PLC and Julius Baer Group. All three banks declined to comment on what they called speculation.
Though the U.S. used information from a whistleblower to pressure Switzerland into handing over the names of some U.S. taxpayers with secret Swiss accounts last year, the confrontation with Germany represents a bigger threat to the Alpine nation's Swiss tradition of bank secrecy. German officials say the country's taxpayers, who are required to pay relatively high taxes, have about €175 billion in Swiss bank accounts, or more than 10% of Switzerland's estimated $1.8 trillion offshore-banking business.
Switzerland has suggested an international agreement under which banks would levy a withholding tax on foreign account-holders and send the funds back to their home countries. But a number of European countries, sensing that Bern is on the defensive, are pressing for Switzerland to agree to a full exchange of information on foreign account-holders.
The Swiss have resisted, although the Swiss finance minister suggested over the weekend that the country could be more open to the idea in order to give Swiss banks greater access to other European markets. "If we want a [financial-services] agreement, we have to be prepared to take on European rules-and Europe has the automatic exchange of information," Hans-Rudolf Merz told Swiss newspaper NZZ am Sonntag in comments published Sunday.
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