Germany takes no-nonsense approach to tax evaders

Tue, Oct 30, 2012, 00:00

Germany has no problem going after evasion – even buying up stolen data to do so, writes DEREK SCALLYin Berlin

THE CASE of Kostas Vaxevanis is unlikely to improve the dim view many Germans hold of their Greek neighbours in matters of fiscal honesty.

The Greek journalist’s court appearance for publishing the details of more than 2,000 Greeks with Swiss bank accounts made news here, in particular because two former Greek finance ministers failed to initiate tax-evasion investigations into the account holders.

Germany, on the other hand, has no problems going after its own tax evaders – even buying up stolen information to do so.

In the past five years, the German authorities have bought six sets of bank account details of German citizens, mostly in Swiss banks.

The first high-profile case in 2006 resulted in the prosecution for tax evasion of one of Germany’s most high-profile managers at the time, Deutsche Post chief Klaus Zumwinkel.

While most tax investigations are still ongoing, the initial outlay of about €9 million for the stolen information has already netted €3 billion for the German tax authorities.

Germany’s biggest buyer is its most populous state, North Rhine-Westphalia, home to one in five Germans. The state government has earned an extra €570 million in taxes and fines on undeclared income squirrelled away in Switzerland.

Finance officials in Düsseldorf have noticed that news of data purchases triggers a run of declarations of previously undeclared income from citizens hoping to avoid fines or prosecution. These late piques of fiscal conscience have raised €300 million for North Rhine-Westphalia alone through some 6,700 late declarations.

“The purchase and analysis of these files is not just correct, it is also legal,” says North Rhine-Westphalia finance minister Norbert Walter-Borjans.

Not everyone is so sure. Swiss authorities are examining legal complaints that the practice has created a market in stolen information, encouraging further illegal data thefts. While the practice of buying stolen information is viewed as illegal by Swiss authorities, Germany views it as tolerable as long as the Swiss banking secrecy laws protect tax evaders.

The purchases will, Bern warns, endanger the future of a new tax co-operation law with Berlin. This deal would see Swiss banking secrecy maintained, but oblige Swiss banks to pass on, anonymously, to Germany the tax revenue from undeclared funds of German citizens bunkered in its vaults.

Federal finance minister Wolfgang Schäuble has refused to condone the data theft practice, nor has he condemned it outright.

“CD purchases are only the second-best solution,” he said in an interview last week. “The state should make sure that laws are adhered to without itself co-operating to a greater or lesser extent with criminals.”

The Christian Democrat Schäuble says the new tax agreement with Switzerland will bring to an end the dubious data buy-up business.

But Germany’s Social Democratic Party (SPD) views the agreement with Bern as too lenient on tax evaders.

The SPD controls a majority of states in Germany and the party has refused to back the law ahead of a vote in the upper house, the Bundesrat, planned for November 23rd.