Switzerland has agreed to a revised tax deal with Germany, with Switzerland to pay billions of dollars on funds hidden in its banks by German tax dodgers. The deal was the latest step in an international charm offensive that is meant to salvage at least some of Switzerland's famous banking secrecy.
The accord, which was tougher to reach after a deal in September was criticised by German opposition parties and European Commission officials in Brussels, provides for the assessment of a one-time charge of 21 to 41 per cent of the value of secret German accounts, higher than the original agreement of 19 to 34 per cent. Swiss banks that are home to such accounts would make payments to the German government.
Anyone inheriting such an account will have to either pay a 50 per cent tax or disclose its existence to the German authorities. And in the future, taxes on investment income will be withheld at the standard German rate.
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From the Swiss point of view of maintaining banking secrecy, account holders' names will not be revealed to Berlin, and the Swiss authorities will be responsible for ensuring that taxes are paid on behalf of the account holder, who can remain anonymous if desired.
The German Finance Ministry estimated that a one-time payment of back taxes could bring it a windfall of up to €10 billion ($13 billion) with annual payments of €750 million ($980 million) a year thereafter.
Still, ratification of the deal by the German Parliament is not assured. Members of the Social Democrats and the Greens, opposition parties that together have sufficient votes in the Upper House to block it, have argued that the measures are too lenient on tax cheats.
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Switzerland signed a similar deal with Britain on March 20. Both the British and German agreements met with criticism from European Commission officials, who argued that it was not the job of individual member states to negotiate tax relations with non-members. Switzerland does not belong to the European Union.
Seeking to overcome the country's reputation as the biggest offshore tax haven in the world, Switzerland has in recent years moved against money laundering and reached more than 40 deals providing for the exchange of tax data with other governments. “Foreign investors in Switzerland should be taxed at the rates of their country of residence,” Eveline Widmer-Schlumpf, the Swiss President, said on Thursday in a statement, adding: “I am confident that this system will bring benefits as soon as it enters into force. I am also confident that other states will recognise this and will arrange agreements with Switzerland.”
The United States, which is carrying out criminal investigations of Swiss banks for helping Americans evade taxes, remains the biggest source of uncertainty for the Swiss financial sector, and officials in Bern are eager to reach a deal to end those inquiries.
Ms. Widmer-Schlumpf said last month that the Swiss were ready to reach a deal “tomorrow” if Washington were ready. — New York Times News Service