German Tax Amnesty Likely To Fall Well Short Of Goverment Targets

by Ulrika Lomas, Tax-News.com, Brussels

22 April 2004

According to a national media report, revenues from the German government’s tax amnesty on foreign savings have so far fallen well short of expectations.

The German authorities are hoping that the amnesty on income from ‘secretly’ held foreign accounts will reap some EUR5 billion in tax payments this year.

However, German daily Handelsblatt has reported that only EUR76.9 million had been collected as a result of the initiative in the first quarter of 2004.

Moreover, quoting what is believed to be an internal Finance Ministry document, the paper claimed that tax experts are forecasting that less than EUR1 billion in extra revenue will flow into the government’s coffers as a result of the amnesty.

Under the terms of the scheme, penalties and charges are waived when individuals legalise undeclared savings held in foreign accounts, paying a 25% tax. However, from January 1 2005 to the amnesty’s end on March 31 2005, the tax increases to 35%.

The initiative applies to illegally-earned income derived between 1993 and 2002.

Whilst the tax will only apply on a portion of the declared income, critics of the scheme have argued that the tax rate has been set too high, and will thus deter many Germans from taking part.

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