Swiss, Germans sign new tax evasion agreement

April 5, 2012 - 7:25 AM
Switzerland Germany Tax Agreement

Peter Gottwald, German ambassador in Switzerland, left, and Michael Ambuehl, Switzerland's State Secretary for International Financial and Tax Matters, exchange their folders after the signing of an additional protocol on a tax agreement between Germany and Switzerland in Bern, Switzerland, Thursday, April 5, 2012. (AP Photo/Keystone/Peter Klaunzer)

BERLIN (AP) — Switzerland has agreed to a new tough bilateral tax evasion treaty that is expected to bring Berlin's state coffers some €10 billion ($13 billion) next year, Germany's Finance Ministry said.

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 bring into Berlin's coffers. Switzerland has guaranteed a minimum payment of €2 billion, but German 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, representing 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 chose to declare the estate to German authorities.

Also, there will be a flat withholding tax on capital gains of 26 percent — the same as in Germany — on German residents' wealth in Switzerland.

"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 the agreement — which will take effect only on January 1 of next year — leaves tax evaders too much 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.

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.