Swiss, Germans sign new tax evasion agreement

BERLIN (AP) — Germany said Thursday that its state coffers could swell by some €10 billion ($13 billion) next year after Switzerland agreed to a new tough bilateral tax evasion treaty.

The revised agreement, signed by officials from both countries in Switzerland Thursday, seeks to end a long-running dispute over German tax evaders who keep their money in Swiss bank accounts.

The deal allows Germans with undeclared assets in neighboring Switzerland to escape punishment by making a one-time payment of between 21 and 41 percent of the value of their Swiss-held assets — higher than the 19 percent to 34 percent range initially planned.

As part of the deal, Swiss authorities will calculate and transfer the tax payment to Germany. The agreement also grants German authorities wider scope to seek information on German nationals' accounts in Switzerland.

Due to the secret nature of most assets held by German nationals in Switzerland, it is not entirely clear how much the deal will reap. Switzerland has guaranteed a minimum payment of €2 billion, but German finance ministry officials say they expect a total payout of about €10 billion or more next year.

The initial agreement had to be renegotiated after Parliament's upper house, which represents Germany's 16 states, asked for tougher conditions to be imposed on tax evaders.

German Chancellor Angela Merkel's center-right government still needs the support from states governed by the opposition Social Democrats to get the deal approved.

Heirs of German undeclared assets in Switzerland will in future face a 50 percent flat tax unless they choose to declare the estate to German authorities.

There will also be a flat withholding tax on capital gains of 26.4 percent — the same as in Germany — on German residents' wealth in Switzerland.

German taxpayers will also no longer be able to shift assets out of Switzerland to third countries without notification once the agreement takes effect at the start of next year.

"This is how justice is achieved — an equal treatment of people subject to German taxes, regardless if they have their wealth in Switzerland or Germany," Finance Minister Wolfgang Schaeuble said.

But the Social Democrats' leader Sigmar Gabriel rejected the outcome, arguing that tax evaders will still have time to move their assets to another tax haven.

"The core problem remains unsolved — that tax cheaters will get away without punishment," he told reporters, saying his party will seek to block the deal.

Swiss President Eveline Widmer-Schlumpf said the deal was fair to the Germans and urged the opposition to back it.

"Our partner countries should take note that we are serious and will implement our announcements concerning a financial center of integrity, free of undeclared funds," she said at a news conference in Bern. "It will take a lot of dishonest energy to still find a loophole here."

Switzerland has been working to shed its image as a haven for tax evaders, but insisted throughout its negotiations with other governments that it won't accept any automatic transfer of information on foreign account holders — ensuring that a semblance of its banking secrecy remains in place. Switzerland signed a similar amendment to a tax agreement with Britain last week.

U.S. authorities have dealt Switzerland and its banks several serious blows over the past few years, and investigations against at least 11 banks are still pending following the successful case against UBS AG. Switzerland's biggest bank had to pay a $780 million fine and hand over 4,450 clients' files to Washington in 2010.

Since then, an amnesty program and the arrest of several Swiss bankers have given U.S. authorities ample ammunition to pursue some of the country's other banks.

Last month, Switzerland's oldest bank, Wegelin & Co, announced it was selling most of its business after it was indicted in the U.S. for conspiring to help American clients hide more than $1.2 billion from the Internal Revenue Service.

"It is not easy with the USA, but we continue to negotiate," said Widmer-Schlumpf, adding that the goal is to find an overall agreement between the two governments.


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