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Germany's NRW Denies Impunity To Voluntary Tax Declarers

by Ulrika Lomas,, Brussels

22 August 2012

Adopting a hard line, tax authorities in the German state of North Rhine-Westphalia (NRW) are reportedly no longer automatically accepting voluntary declarations made by German residents with undeclared and therefore untaxed wealth located in Switzerland.

Given that the authorities in NRW have already uncovered information on Germans alleged to have evaded taxes in Swiss accounts, following examination of bank data purchased on tax data discs, it is seemingly too late for these individuals, whose deposits are therefore already known to the authorities, to be granted impunity.

Despite the negotiated bilateral tax agreement between Germany and Switzerland, NRW has purchased several tax data discs recently, much to the annoyance of many in the Confederation, and now provoking criticism from the German government.

The coalition and German 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, arguing that the treaty is designed to resolve not just the past but also future cases of undeclared money held by German residents in Swiss banks.

Yet despite the mounting criticism and opposition to the German state’s decision, the tax data discs are proving to be a highly effective instrument with which to claw back evaded taxes, triggering a wave of voluntary declarations. Indeed, the number of voluntary declarations in several German states has greatly increased of late as a result of the purchases.

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 payment.

Germany’s Social Democrats have, however, opposed the plans from the outset, insisting that there are too many loopholes, and have threatened to veto the provisions in the Bundesrat, where the coalition no longer has a majority.

The Bundesrat is to vote on the agreement in the autumn to ensure that the accord enters into force as planned in January 2013.

TAGS: individuals | compliance | tax | tax compliance | tax avoidance | law | Germany | Switzerland

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