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German State Poised To Purchase First Swiss Tax Disc

by Ulrika Lomas, Tax-News.com, Brussels

18 October 2012


The German federal state of Rhineland-Palatinate is reportedly poised to purchase a so-called tax data disc, containing detailed information pertaining to German residents alleged to have undeclared assets located in Switzerland.

Although Rhineland-Palatinate’s finance ministry is at this stage neither confirming nor denying the reports, if confirmed, this would be the first time that this German state has elected to buy access to Swiss banking information.

Rhineland-Palatinate’s Social Democrat (SPD) Finance Minister Carsten Kühl has, however, announced on a number of occasions that he continues to support the purchase of tax data discs, provided that the offer is of ‘intrinsic value’, and provided that the bilateral withholding tax agreement concluded between Germany and the Confederation has not been adopted by either the Bundestag or the Bundesrat, Germany’s lower and upper houses of parliament.

Germany’s Federal Constitutional Court permitted the use of such tax information at the end of 2010. At the time, the court ruled that information regarding alleged tax evaders, contained on discs provided by informants, may be used during criminal investigations, irrespective of whether or not the original means by which the data was obtained was deemed to be lawful.

Yet the issue of whether or not to ‘obtain’ the stolen tax discs to track down suspected tax evaders and to recover lost revenues, has divided Germany’s ruling black-yellow coalition government. While German Justice Minister and Free Democratic Party (FDP) member Sabine Leutheusser-Schnarrenberger called recently for such purchases to be banned by law, her views were not only criticized by German Finance Minister Wolfgang Schäuble but also by some of her colleagues in the FDP leadership.

The decision by North Rhine-Westphalia to purchase several bank information discs has, however, proven highly worthwhile and indeed lucrative for the German state, unleashing a tidal wave of voluntary declarations from tax evaders seeking to regularize their fiscal situation.

The tax agreement between Germany and Switzerland, aimed at resolving the longstanding issue of past tax avoidance and due to enter into force on January 1, 2013, has been vehemently rejected by the SPD from the outset and it remains uncertain as to whether the accord will actually be adopted by the Bundesrat.

The treaty provides for a one-off tax of between 21% and 41% to be imposed on the hitherto undeclared assets of German taxpayers held in Swiss banks, with the revenues transferred anonymously to the German tax authorities. The tax deal also provides for the taxation of future income from German taxpayers with accounts held in the Confederation. The SPD insists that the provisions are too lenient and has called for the text to be renegotiated.

TAGS: court | compliance | tax | offshore confidentiality | tax compliance | tax avoidance | law | banking | offshore | agreements | offshore banking | banking secrecy | withholding tax | Germany | Switzerland

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