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Schaeuble's Last Stand On Swiss-German Tax Deal

by Ulrika Lomas, Tax-News.com, Brussels

21 November 2012


In a last ditch attempt to salvage the tax deal concluded with Switzerland, German Finance Minister Wolfgang Schaeuble reportedly plans to make the federal states a lucrative offer with which to secure their approval for the treaty in the Bundesrat, Germany's upper house of parliament.

It is said that the government is willing to waive its share of revenues from the windfall tax due to be imposed by Switzerland on the hitherto untaxed old wealth of German citizens concealed in Swiss banks, and to accord its share of the income to the federal states.

The bilateral tax accord provides for the one-off taxation of undeclared assets held by German taxpayers in the Confederation's banks, at withholding tax rates varying from between 21% and 41%. The provision is expected to lead to revenues of up to EUR10bn (USD12.8bn). Up until now, the government had planned to allocate 70% of this sum to the federal states, while retaining a 30% share.

Determined to ensure adoption of the accord in the Bundesrat, where the black-yellow coalition no longer has a majority, the government is reportedly also prepared if necessary to allocate the federal states its share of revenues from the 25% withholding tax (plus solidarity surcharge) to be imposed from 2013 on future capital gains received by German taxpayers from Swiss accounts. The tax is expected to yield around EUR750m annually.

With time of the essence, the government is under increasing pressure, particularly as a last glimmer of hope recently faded when Baden-Wurttemberg's Prime Minister Winfried Kretschmann (Green Party) and Finance Minister Nils Schmid (Social Democrats) announced that last minute talks with Swiss representatives had failed. The ministers therefore declared that the text could simply not be signed in its current state.

Already adopted by the Bundestag, or lower house, at the end of October, the Swiss-German tax accord is due to be put to the vote in the Bundesrat on November 23.

TAGS: tax | investment | offshore confidentiality | banking | offshore | offshore banking | banking secrecy | tax rates | withholding tax | Germany | Switzerland

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