Swiss President Stands Firm On German Tax Deal

by Ulrika Lomas, Tax-News.com, Brussels

04 December 2012

Swiss President Eveline Widmer-Schlumpf has recently insisted that there is simply no scope for further improvements to be made to the bilateral Swiss-German tax deal, despite the German parliament’s rejection of the treaty on November 23.

Emphasizing that no further concessions are conceivable, Widmer-Schlumpf stressed that Germany and Switzerland have already negotiated a "good and fair treaty," which is mutually beneficial, pointing out that both sides had already had to make concessions.

Widmer-Schlumpf warned that there is either this treaty or no accord, highlighting the fact that no agreement would be "good news" for German tax evaders who could continue to remain undiscovered until the statute of limitations for the tax crime passes. The minister reiterated that Switzerland would on no account provide mutual assistance for requests for information based on stolen banking data.

At the end of November, as predicted, the German Bundesrat, or upper house of parliament, rejected during a plenary sitting the landmark tax deal concluded between Germany and Switzerland, providing for cooperation in the area of taxation.

Negotiated by German Finance Minister Wolfgang Schäuble, the bilateral tax treaty provides for a 25% withholding tax (plus solidarity surcharge) to be imposed from 2013 on capital gains received by German taxpayers with accounts held in Switzerland, ensuring that capital gains realized in Switzerland are in future treated in the same way as in Germany.

The accord also provides for a 50% tax to be imposed on inheritances in Switzerland, unless German residents opt to declare their inheritance to the German tax authorities.

The tax deal also provides for the taxation of hitherto undeclared and untaxed assets held by German taxpayers in Swiss banks, at withholding tax rates varying from 21% to 41%.

The German government recently decided to convene a mediation committee to resolve the matter. The committee is due to meet in mid-December.

As matters stand currently, the accord will not now enter into force as planned on January 1, 2013. Given that the treaty has already been adopted by the Swiss parliament, it remains to be seen as to how the German coalition might salvage the deal.

Widmer-Schlumpf is expected to travel to Paris shortly to hold talks with French President François Hollande, to endeavor to persuade France of the benefits of concluding a similar withholding tax deal.