Court Ruling Gives German Tax Inspectors A Boost

by Ulrika Lomas, Tax-News.com, Brussels

06 August 2001

A savings bank in the North German state of Schleswig Holstein has lost its appeal in the Federal Financial Court, greatly strengthening the hand of the country's tax authorities, it was revealed recently.

The investigation into the bank began in 1998, when the local financial authorities became suspicious that some of the bank's clients were using it as a conduit to transfer untaxed transaction proceeds to secret bank accounts in Luxembourg. A search of the trading rooms also revealed that securities bought by clients for cash had gone unreported.

However, when tax inspectors tried to take their findings to the local authorities, the bank applied for a temporary injunction at the local financial court, and when this proved unsuccessful, applied to the Federal Financial Court for an injunction.

However, this proved to be a costly move, as last week the Federal Court ruled that even if a client held an account with the bank in question, transactions carried out anonymously, and for cash could reasonably be considered to have been for the purposes of tax evasion, and that this suspicion would overrule all considerations of banking confidentiality. In July, the Head of Customs, Werner Eberhardt despairingly described tax evasion as a 'mass sport' in Germany. However, a spokesman for the Schleswig Holstein finance ministry believes that this ruling sends out a clear message to banks across the country, and had a chilling message for tax dodgers last week: 'The only advice that can be given to investors who do not exercise fiscal probity is to give themselves up.'

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