Germany and Switzerland will negotiate a withholding tax that raises revenue from offshore Swiss bank accounts while keeping client identities secret.
The talks, starting early next year, will aim to resolve the issue of stolen client data, the two countries’ finance ministries said today. Swiss Finance Minister Hans-Rudolf Merz and his German counterpart, Wolfgang Schaeuble, signed a tax agreement in Bern, allowing investigators to request assistance in tracking down undeclared money deposited by German nationals.
“Switzerland is eventually managing to escape the ‘bad guy’ image as a safe haven for tax dodgers,” said Stefan Bach, a tax analyst at the DIW economic institute in Berlin. “The country is yielding to international pressure as they weren’t able to continue the previous policy of harboring tax evaders.”
The withholding tax proposed by Swiss banks on the interest, dividends, capital gains and investment income earned by foreign citizens with offshore accounts could raise about 1.6 billion euros ($2.2 billion) a year for the German government, according to Bach. The deal with Germany follows a similar accord that Switzerland signed with the U.K. two days ago.
Schaeuble declined to comment on how much revenue the tax could raise for Germany.
“This deal helps to satisfy the needs of Switzerland as a financial center and the needs of the German fiscal authorities,” Merz told reporters in Bern. “What the automotive industry is to Germany, the banking sector is to Switzerland.”
Biggest Customers
Germans are the biggest cross-border customers of Swiss banks with about 280.6 billion Swiss francs ($284 billion) of assets, of which an estimated 69 percent is undeclared, Geneva- based broker Helvea SA estimated last year. Only 16 percent of the 863 billion francs held in Swiss banks by European nationals were declared, according to Helvea.
The Swiss wealth-management industry was shaken on March 13, 2009, when the government agreed to work with countries investigating tax evasion to avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development. Switzerland has initialed or signed almost 30 tax treaties over the past 19 months to implement international standards and help track down tax evaders.
The accord may help Chancellor Angela Merkel’s government in its efforts to shrink the budget deficit as well as tackle a decades-old dispute on how to deal with German tax dodgers hiding funds in Swiss accounts. The two sides will also discuss the Swiss request of getting better access for the country’s financial institutions to the German market.
Legacy Assets
Germany and Switzerland have been discussing ways to tax legacy assets since March. German officials over the past two weeks have dismissed as speculation a report in the Frankfurter Allgemeine Zeitung that a tax agreement could yield 30 billion euros in tax revenue next year.
“I don’t expect German clients to withdraw money from Switzerland,” said Peter V. Kunz, head of the business law department at the University of Bern. “This will come as a relief as the parties have found a solution for the legacy assets that preserves bank secrecy.”
Relations between both countries deteriorated last year when former Finance Minister Peer Steinbrueck said Switzerland encouraged Germans to evade taxes. At the time Blick, a Swiss mass-market newspaper, called Steinbrueck one of the “most hated people in Switzerland.”
Tensions were strained again this year as German prosecutors began to buy CDs containing stolen data as a way to pursue tax evaders.
“I think it won’t be necessary any more to buy stolen data as we will have other means to prevent abuse of the different tax systems,” German Finance Minister Schaeuble said today in Bern. “It’s the intention of both Germany and Switzerland that depositing undeclared funds is a thing of the past.”
To contact the reporters on this story: Klaus Wille in Zurich at kwille@bloomberg.net Patrick Donahue in Berlin at at pdonahue1@bloomberg.net
To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net John Fraher at jfraher@bloomberg.net
source: www.bloomberg.com
