German tax officials face Swiss arrest

The tax dispute between Germany and Switzerland has moved into the judicial domain Keystone

Swiss authorities have issued arrest warrants for three German tax inspectors over the purchase in 2010 of a CD containing data on suspected tax cheats.

This content was published on March 31, 2012 minutes and agencies

The Federal Prosecutor's Office said that it had sought legal assistance from German authorities in an investigation of the theft of Credit Suisse data.

Federal prosecutor Michael Lauber confirmed on Swiss public radio on Saturday that there were serious indications of intelligence gathering carried out against the Credit Suisse bank and that a request for judicial assistance had been made.

His office said in statement later that it could not give details of the request for assistance. It said there is a "concrete suspicion that orders were issued from Germany to spy on information" of Credit Suisse. The officials face arrest if they enter Switzerland.

Lauber pointed out that his office was working completely independently in the matter and ruled out any tie to the ongoing tax dispute between Switzerland and Germany, adding he could not comment on the possible repercussions of his decision on talks between the two countries.

He refused however to answer whether the government had been informed of the decision to issue arrest warrants against the three German officials, simply stating that in general this type of case is regularly discussed with the cabinet.

However, when an accord announcing the end of the tax dispute was announced last year, Germany promised to purchase no more bank client data while Switzerland said it would not launch any further criminal proceedings against those involved in the earlier purchases.

Illegal purchase

The German state of North Rhine-Westphalia paid an informant  €2.5 million (SFr3 million) in 2010 for the CD, which allegedly contained the names of around 1’500 bank clients who had stashed their funds in Swiss accounts.

The informant was convicted last December by the Federal Criminal Court for passing on confidential business data and violating Switzerland’s banking secrecy laws. The man was sentenced to a two-year suspended prison sentence and ordered to pay a SFr3,500 fine.

The North Rhine-Westphalia finance ministry had confirmed earlier in the day a report published by the Bild am Sonntag newspaper, which claims the three investigators are accused of ‘economic espionage’.

The North Rhine-Westphalia prime minister, Social Democrat Hannelore Kraft, told the Bild it was unfair to cast state employees in a criminal light, saying that the move was "monstrous."

“Our investigators only did their duty in hunting down tax evaders who stash their money in Swiss bank accounts,” she said, adding that Switzerland’s attitude would not help the approval by the German parliament of a tax deal with the Swiss.

Blocked deal

Kraft is one of several state leaders continuing to block the tax accord with Switzerland aimed at ending the dispute over German tax evaders.

The deal needs approval by the German parliament’s upper house, which represents Germany’s 16 states and where Chancellor Angela Merkel’s centre-right government lacks a majority.

The states governed by opposition Social Democrats want tougher terms than originally negotiated.

The current proposal would entail Germans making one-time payments to legalize money hidden in Swiss bank accounts and foresees a so-called withholding tax on future income from assets in Switzerland.

Germany's federal government says it hopes for movement after North Rhine-Westphalia and another state hold regional elections in May.

"There are still overly big loopholes for German tax cheats," Kraft said, according to Bild am Sonntag. "That can't be explained to honest citizens."

German news agency dapd reported that German Finance Minister Wolfgang Schäuble said at a meeting with European counterparts in Copenhagen that the incident wouldn't affect the tax deal, and noted that "Switzerland has its criminal law", which includes punishments for violating bank secrecy.

Big deal

The Swiss-German tax accord, which has not yet been ratified by Germany, has been under threat after German opposition parties said it was too soft on tax evaders who had stashed an estimated SFr150 billion ($163 billion) in secret accounts.
Under the accord, effective from next year, existing funds in Swiss banks will be taxed at a rate of between 19 per cent and 34 per cent, based on how long the money has been stashed away and the rate of capital gains.
Future investment income and capital gains will be taxed at 26.375 per cent. However the states have stated they want that rate to be 35 per cent, comparable with German levels.
Swiss banks will pay SFr2 billion up front to Germany within 25 days of the deal being ratified. A provision prevents tax dodgers from moving their funds to another safe haven.

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