German Law Against Tax Evasion Proves Futile

by Ulrika Lomas, Tax-News.com, Brussels

11 January 2010

Germany’s new and highly controversial law against tax evasion has virtually been overridden by events: the Finance Ministry has revealed that it is simply unable to identify any jurisdiction that fulfils the conditions required for its application.

The law, containing severe sanctions for anyone with links to so-called “tax havens,” was adopted by the previous grand coalition government, and entered into force in Germany at the end of September last year.

Since then, finance officials have been unable to apply the law, as the Organization for Economic Cooperation and Development’s (OECD) “black list” of countries deemed uncooperative in tax matters simply no longer exists. The law therefore remains merely a threat – for the time being at least.

Bowing to increasing international pressure in the wake of the global financial crisis, those countries that had initially been placed on the OECD’s infamous black list, have now agreed to cooperate fully in tax matters, and to adhere to the OECD standards on information exchange.

However, given that certain jurisdictions remain on the OECD’s “grey list” of countries who have officially agreed to cooperate in take matters in order to combat tax evasion, although have failed to take action in this respect, Germany's political opposition are eager to maintain the law. The Finance Ministry is considering possible future amendments.

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