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German Mediation Committee Rejects Swiss Tax Deal

by Ulrika Lomas, Tax-News.com, Brussels

14 December 2012


Germany’s parliamentary mediation committee, comprising members of both the Bundestag (lower house) and the Bundesrat (upper house), has failed to reach a compromise on the bilateral tax deal with Switzerland aimed at dealing with undeclared German balances held by Swiss banks.

Instead, the mediation committee called for the coalition government to initiate a new round of talks with the Confederation to negotiate "a fair agreement," insisting that a tax accord with Switzerland should not reward German tax evaders. For reasons of social justice a higher tax must be imposed on those who have evaded their tax obligations, the committee stressed.

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 agreement was intended to draw a line under the purchase by German states of stolen tax data discs, containing the names of German residents alleged to have undeclared and untaxed assets held in Swiss banks.

Responding to the news, President of the Swiss Confederation Eveline Widmer-Schlumpf said: "We regret that Germany has not ratified the withholding tax agreement signed between Switzerland and Germany."

The Swiss Federal Department of Finance (FDF) commented: "Concerning Germany, what remains after the 'No' is the less than satisfactory status quo with chance finds on CDs which have been acquired illegally and administrative assistance upon request according to the international standard. Furthermore, with each passing year without an agreement, a considerable proportion of the outstanding tax amounts will be subject to the statute of limitations."

The FDF continued: "Switzerland will bring the withholding tax agreements with the United Kingdom and Austria into force on January 1, 2013. In this way, it will be shown that the agreements can be duly implemented in practice and that actual tax money will be transferred."

The FDF concluded: "Negotiations on similar agreements are under way with Greece and Italy. Other countries both within and outside Europe have also shown an interest. The withholding tax model efficiently ensures that no untaxed foreign money can be hidden in Switzerland. It is an alternative to the automatic exchange of information."

TAGS: inheritance tax | tax | investment | offshore confidentiality | interest | banking | offshore | agreements | offshore banking | banking secrecy | withholding tax | Germany | Switzerland

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