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Voluntary Declarations Popular In NRW

by Ulrika Lomas,, Brussels

12 July 2013

Following the collapse of the Swiss-German tax deal in the German Bundesrat, or upper house of parliament, North Rhine-Westphalia's (NRW) Finance Ministry has unveiled the latest figures revealing that the number of voluntary declarations has quadrupled in the first six months of 2013, compared to the first half of 2012.

According to NRW's Finance Ministry, 1,528 voluntary disclosures have been submitted statewide since January. This figure compares to the 347 disclosures received between January and the beginning of July last year.

The total number of individuals electing to submit a voluntary declaration, to regularize unreported income, has soared to 8,939 since Spring 2010. Significant increases were recorded in May and June of this year, with 365 voluntary disclosures filed in May and 452 declarations collected in June.

German residents who have evaded their tax obligations in Germany, and have undeclared accounts held abroad, are able under certain conditions to provide a voluntary declaration to the German tax authorities, to regularize their accounts without fear of criminal prosecution. However, in order to qualify for the amnesty, individuals must declare the total sum of the taxes evaded. In addition, repentant taxpayers must not already be under investigation.

However, since the beginning of 2013, taxpayers in NRW have been compelled to divulge their identity, as part of the voluntary declaration process. NRW's Finance Ministry points out that this would not have been the case, and that taxpayers would have retained their anonymity, if the "unfair" accord with Switzerland had entered into force as planned at the beginning of the year.

Furthermore, there is also still the threat that German states will continue to purchase tax data discs, containing stolen banking information on German residents with untaxed accounts held abroad, the Finance Ministry adds.

Commenting, NRW's Finance Minister Norbert Walter-Borjans warned that the German state would continue to make every effort to ensure that tax loopholes are closed both at home and abroad, and underscored the federal state's commitment to maintaining pressure on tax evaders. For many the fear of discovery remains the most important argument for filing a voluntary declaration, he stressed.

Walter-Borjans played a pivotal role in opposing the Swiss-German withholding tax agreement in the Bundesrat. The treaty was finally blocked by German Opposition parties at the end of last year. The Social Democrats and Green Party argued that the text was too lenient on tax evaders.

Negotiated by German Finance Minister Wolfgang Schäuble, the bilateral tax treaty provided for a 25 percent 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 were in future treated in the same way as in Germany.

The accord also provided for a 50 percent tax to be imposed on inheritances in Switzerland, unless German residents opted to declare their inheritance to the German tax authorities.

Finally, the tax accord provided for the taxation of hitherto undeclared and untaxed assets held by German taxpayers in the Confederation's banks, at withholding tax rates varying from 21 percent to 41 percent.

However, the Bundesrat's rejection may not mark the end of the affair. Switzerland announced its willingness at the beginning of May to hold fresh talks with Germany on a new withholding tax agreement between the two countries.

TAGS: individuals | inheritance tax | compliance | Finance | tax | tax compliance | tax avoidance | banking | tax rates | withholding tax | Germany | Switzerland | individual income tax

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