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Germany's FDP Split On Swiss Tax Deal

by Ulrika Lomas,, Brussels

24 August 2012

Marking a significant about turn, the financial spokesman of Germany’s ruling Free Democratic Party (FDP) Volker Wissing has announced that the party is prepared to hold further talks with Switzerland on the bilateral tax deal between the two countries.

The announcement follows repeated calls from opposition party the Social Democrats (SPD) for the treaty with the Confederation to be renegotiated.

Wissing insisted that the SPD’s calls for a minimum tax rate of 25% to be imposed on German taxpayers’ assets held in Switzerland are a “good signal for the tax agreement with Switzerland”, showing that the party has given up plans to block the accord in the Bundesrat.

The tax rate currently proposed within the framework of the accord for old money held by German residents in the Confederation is 21%

Highlighting the overarching aim of the agreement, namely to ensure that German residents with assets held in Swiss banks pay a fair contribution in tax and to restore good relations with neighbouring Switzerland, Wissing stressed that opposition's plans to veto the treaty in parliament would merely have benefited tax evaders.

Alluding to the decision by 'red-green' led states to purchase tax discs containing information on Germans with undeclared accounts in Switzerland, Wissing warned that the action is not only “legally problematic” but also in no way a suitable means to ensure systematic taxation.

Concluding his remarks, Wissing underscored that the FDP would not stand in the way of a “constructive debate” and purposeful renegotiation of the text with Switzerland.

Yet opinion within the party is clearly divided. Germany’s Foreign Minister Guido Westerwelle (FDP) swiftly rejected Wissing’s statement, insisting that there is no reason to renegotiate the treaty, which promotes tax compliance and creates legal certainty. It is in German interests to restore good relations in tax matters with the Confederation, the minister added.

Adopted at the end of April by the German cabinet, the accord, which has already been modified following significant concessions from Switzerland, aims to ensure the equal treatment of the wealth of German citizens, whether located in Germany or in Switzerland, and to restore tax equity for the past by means of a lump sum tax.

Germany’s coalition government and Chancellor Angela Merkel consider the tax accord with the Confederation to be a suitable way to satisfactorily resolve the difficult, longstanding conflict between the two countries.

The Social Democrats have opposed the treaty from the outset, arguing that the text contains too many loopholes and have threatened to veto the deal in the Bundesrat, or upper house, where the coalition no longer has a majority.

Rhineland-Palatinate’s Finance Minister Carsten Kühl (SPD) recently called for the minimum rate of tax on old wealth held by German residents in the Confederation to be increased to 25%.

The Swiss government and Germany’s black-yellow coalition government have up to now firmly rejected the idea of any further negotiations.

TAGS: compliance | Finance | tax | offshore confidentiality | tax compliance | interest | banking | budget | offshore | banking secrecy | Germany | Switzerland

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