Switzerland and Germany have reached agreement in principle on a new double-taxation accord.This content was published on March 26, 2010 - 19:12
Swiss finance minister Hans-Rudolf Merz and his German counterpart, Wolfgang Schäuble, initialled an accord in Berlin on Friday that is set to help Germany in its campaign against tax cheaters.
The deal will clarify tax disclosure rules for Switzerland’s multi-trillion-dollar wealth management industry.
The Swiss finance ministry said details of the agreement would not be disclosed before it was signed.
However, it said the “key element” of the revised agreement was the “extension of administrative assistance in tax matters in accordance with the Organisation for Economic Cooperation and Development (OECD) standard”.
“We found solutions for the many contentious issues,” Merz said after the meeting, clearly satisfied with the result.
He stressed that Switzerland had no interest in illicit money. “The new agreement...will prevent untaxed foreign assets ending up in Swiss financial institutions,” the Swiss finance minister explained.
Switzerland has watered down its treasured bank secrecy law recently, caving in to pressure from the United States and European governments that are cracking down on tax evasion.
Germany, along with Italy, the US and France, has been one of the most fervent critics of Switzerland's banking secrecy and has paid for stolen data from Swiss banks to catch tax cheats.
Germany's willingness to buy stolen bank data increased pressure on Switzerland's large private banking industry and stirred emotions in both countries. Germans hold an estimate €200 billion in undeclared funds in Switzerland.
The Swiss finance ministry said on Friday that Germany had recognised in the talks that Bern would not give administrative assistance in cases of bank data bought from a third party.
It added that Switzerland was able to secure several advantages for Swiss businesses during the negotiations, and that a bilateral working group would clarify unresolved tax issues before the signing.
The working group will try to resolve among other issues how assets in Swiss banks belonging to German nationals should be taxed.
Merz suggested a withholding tax could be applied. For his part, Schäuble ruled out offering tax cheats an amnesty to encourage them to repatriate their money.
“I don’t think much of that. We would be better off ensuring that taxes are paid voluntarily on assets that have been hidden away for years,” the German finance minister said.
The Swiss Bankers Association welcomed the double taxation agreement, especially as it conformed to OECD standards, spokesman Jean-Marc Felix said.
"We also welcome the implementation of the joint working party, because this will tackle the topics we have always put forward for discussion, namely a withholding tax, the regulation of untaxed client assets and the improvement of market access in Germany," he said.
swissinfo.ch and agencies (with input from Paola Carega in Berlin)
The OECD placed Switzerland on a grey list of uncooperative tax havens in April 2009. The Swiss were removed in September after renegotiating several double taxation treaties, but they have refused to automatically transfer information to tax investigators without proof of crimes.
Former German Finance Minister Peer Steinbrück referred last summer to the Swiss resembling Indians running away from the cavalry. Italian Finance Minister Giulio Tremonti said that he wanted to “bleed dry” the financial sector in the southern Swiss canton of Ticino.
Several countries, including Italy, France, Britain and the United States launched tax amnesties last year in an effort to repatriate assets from tax cheats.
The most damaging tax evasion case involved the activities of UBS bank in the US. In February 2009, 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 4,450 UBS clients to the US – in effect violating Swiss banking secrecy to prevent a ruinous court case for UBS.
A former employee of HSBC private bank in Geneva ran away with sensitive data on thousands of clients that he handed over to the French authorities last year.
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