Representatives from both chambers of Germany’s parliament have failed to reach an agreement on a German-Swiss tax accord, effectively ending any chance of ratification after the opposition refused to review its position.
A mediation committee met on Wednesday to seek a compromise that would have allowed the accord aimed at legalising undeclared assets held by Germans in Swiss banks to take effect next month.
Late in November, the centre-left German Social Democrats and Greens effectively blocked the deal by voting against the agreement in the Senate where they hold the majority, claiming notably the accord had too many loopholes and let off those who had failed to pay their taxes too easily.
The lower house of the German parliament, where Chancellor Angela Merkel’s coalition has the majority, approved the deal in October.
"We regret that Germany has not ratified the withholding tax agreement signed between Switzerland and Germany,” said Swiss President Eveline Widmer-Schlumpf after the decision.
In a statement, the State Secretariat for International Financial Matters said the status quo with Germany was less than satisfactory, with Switzerland’s northern neighbour relying on CDs containing data acquired illegally and then requesting administrative assistance to track down tax evaders.
It also pointed out that Germany would be losing money as a large share of outstanding tax would be subject to the statute of limitations.
The accord would have imposed a retroactive levy of up to 41 per cent on capital in offshore bank accounts held by Germans, imposed a tax on future interest income, while allowing account holders to remain anonymous.
Revenue from tax arrears under the deal would have been worth €10 billion ($12 billion), plus an additional €700 million annually from withholding tax according to German government estimates, although the opposition contested the figures.
The Swiss bankers Association said it regretted the accord had been rejected because of “domestic policy reasons in Germany”, adding that deal was “a fair, optimum and sustainable solution to definitively settle bilateral tax issues”.
Switzerland had already approved the tax accord with Germany despite some opposition from the rightwing and left.
The centre-right Radicals said that Germany had missed the opportunity to sign a “good and fair tax deal” with Switzerland. They also demanded that the government stick with its current strategy and not return to the negotiating table with the Germans, or otherwise risk becoming “a pawn in Germany’s electoral debate”.
Widmer-Schlumpf confirmed there would be no further talks concerning the deal, admitting that it was dead and adding there was nothing left to discuss. She did not rule out fresh talks at a later date, but not in the next 12 months.
“We are neighbours, so we have to find solutions,” she added.
The centre-left Social Democrats said on the other hand that the rejection of the deal was proof that allowing account holders to remain anonymous while imposing a withholding tax was “a dead end”.
They called on the cabinet to consider the automatic exchange of bank data, which could provide a definitive solution to the various disputes with other countries over banking secrecy.
The rightwing Swiss People’s Party, which had not been in favour of the accord, was not unhappy about the outcome. Its secretary-general Martin Baltisser said nothing had changed for Switzerland, and that Germany would be able to continue requesting administrative assistance.