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Germany tempted by stolen bank data

German finance minister Wolfgang Schäuble faces a tough decision Keystone

To buy or not to buy? The German authorities appear tempted by the offer by an unknown informant to sell them stolen bank client data on possible tax evaders.

Chancellor Angela Merkel said on Monday Germany should do everything in its power to obtain data to fight tax evasion, adding that every reasonable person knows that tax evasion needs to be investigated. “If the data is relevant, we must get possession of it.”

However, she said that the first thing to do was to conduct talks with the countries involved, in order to smooth the way.

The informant has offered to sell data on some 1,500 bank clients. He – or she – is asking for 2.5 million euros (SFr 3.7 million) for the information.

On the basis of information on five clients already supplied as proof of the informant’s claims, investigators estimate that if they purchase all the data, the authorities could net about 100 million euros.

Since the report by the Frankfurter Allgemeine Zeitung appeared late on Friday, the issue has been hotly debated in both Germany and Switzerland.

A spokesman for the German finance ministry said the authorities were currently seeking to clarify legal issues surrounding the case.

He said the government would follow the same guidelines as in a similar case two years ago, when the German authorities paid for data on taxpayers who had hidden money in Lichtenstein.

Phone call

The German finance minister, Wolfgang Schäuble, telephoned his Swiss counterpart, Hans-Rudolf Merz on Monday to inform him officially that authorities the German state of North Rhine-Westphalia had been offered the chance to buy bank client data.

He told Merz that the government was deciding whether to take up the offer, a press release from the Swiss finance ministry reported.

The two ministers noted that Germany and Switzerland had different legal positions in such cases. Merz said the use of stolen data “constitutes a breach of the privacy of the clients concerned”, and that purchase of such data is forbidden under Swiss law.

He added that Switzerland would not provide any administrative assistance on the basis of stolen data, but was ready to increase tax cooperation with Germany based on a revised double taxation agreement.

Chasing up tax cheats

Two German opposition parties, the Social Democrats and the Greens, have come out clearly in favour of buying the data.

Sigmar Gabriel, chairman of the centre left Social Democrats, described it as “scandalous” that people should be prosecuted for the least parking violation, while those who have hidden up to 200 million euros in taxes are allowed to get away with it.

Green party leader Renate Künast said that chasing up tax cheats is to the benefit of everyone.

Both parties interpret the hesitations of the two parties of the government coalition, the so-called Union and the Free Democratic Party (FDP), as being based on concern for their own voters, since they are parties which tend to attract the wealthy.

“Theft is theft”

The liberal FDP is divided over the issue. The party’s Volker Wissing, chairman of the parliamentary finance commission, has spoken in favour of buying the data, although he wants to be sure that there is no legal obstacle.

However, Otto Fricke, the party’s parliamentary affairs manager took the opposite line: “The old rule holds true: no deals with criminals”.

So far Merkel’s own grouping, the Union, (made up of the Christian Democratic Union and the Christian Social Union of Bavaria) has come out largely against the purchase. Even so, the finance minister of Lower Saxony, Hartmut Möllring of the CDU, told German radio that the state was bound to follow up information about tax evaders.

But the leader of the Union’s parliamentary faction, Volker Kauder, told the Süddeutsche Zeitung newspaper that “theft is theft”, and the state should not demean itself to do business with thieves.

For his part, Hans Michelbach of the CSU said the state should try to obtain the data legally, with the aid of the Swiss authorities.

Swiss reaction

Swiss President Doris Leuthard, who is also the country’s economics minister, said on Sunday that she found it hard to think that a “state based on the rule of law should use illegal data”.

Both the Swiss Bankers Association (SBA) and the Swiss Private Bankers’ Association (SPBA) have come out strongly against any German decision to buy the data, describing such a move as “handling stolen goods”.

Both organisations want the banks to deduct tax at source. This would preserve bank secrecy while removing the incentive to steal bank data.

The SBA has warned that if the German authorities decide to buy the data, this could be counter-productive in view of upcoming negotiations about a revised double-taxation agreement.

In the final resort it is up to the finance minister of North Rhine-Westphalia to decide what to do, in discussion with the German federal finance ministry.

Julia Slater, (with input from Paola Carega in Berlin)

The tax dispute between the two countries has been brewing for several years

2006-2008: An employee of the Liechtenstein Global Trust (LGT) sells the German authorities DVDs with stolen data on more than 1,400 German clients suspected of evading taxes.

February 2008: The authorities use the information to investigate more than 700 German citizens. The most prominent is former Post head Klaus Zumwinkel.

March 2008: In the wake of the Liechtenstein case, German tax officials turn their attention to Switzerland.

October 2008: Finance ministers of Germany and France call for Switzerland to be blacklisted as an uncooperative tax haven.

January 2009: Zumwinkel is fined more than a million euros. In all the data obtained from Liechtenstein bring Germany 177 million euros.

March 2009: Under pressure from the G-20, Switzerland agrees to accept OECD standards regarding exchange of information in cases of tax evasion as well as fraud.

March 2009: The then German finance minister, Peer Steinbrück, angers Swiss by comparing them to Indians “running scared” of the US cavalry.

April 2009: The OECD puts Switzerland on its grey list of tax havens.

September 2009: Switzerland is removed from the “grey list” after signing new tax agreements with 12 countries.

Switzerland came under sustained attack in 2009 for helping foreign tax evaders hide their assets.

The most damaging tax evasion case involved the activities of UBS bank in the US. In February, UBS was fined $780 million after admitting helping US citizens to dodge taxes.

In September, the Swiss government was forced to hand over the details of 4,450UBS clients to the US – in effect violating Swiss banking secrecy to prevent a ruinous court case for UBS.

In January 2010 the Swiss Federal Administrative Court ruled that the handover was illegal.

In December 2009 an employee of the Geneva-based HSBC private bank passed confidential client data to the French authorities.

The employee responsible said he acted from altruistic motives. He has denied reports that he is the would-be informant in the German case.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR