Swiss, German finance ministers to sign tax deal

AP News
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Posted: Oct 27, 2010 10:17 AM
Swiss, German finance ministers to sign tax deal

Switzerland and Germany are poised to sign a deal that will make it easier for Berlin to obtain information on suspected tax cheats hiding assets in secret Swiss bank accounts, officials said Wednesday.

The agreement _ whose broader purpuse is to prevent companies and individuals from being taxed twice _ includes a clause to help resolve what has become a long-running and at times acrimonious dispute between the two countries.

Swiss Finance Minister Hans-Rudolf Merz is due to meet his German counterpart Wolfgang Schaeuble in Bern late Wednesday to complete the deal, which requires Switzerland to lift its strict banking secrecy laws in future cases of suspected tax evasion. They will also declare their intention to find a solution for billions of euros (dollars) in untaxed German assets already sitting in Swiss vaults, officials said.

Berlin has long accused Switzerland of shielding German tax cheats by only helping foreign authorities investigate outright tax fraud but not the lesser offense of tax evasion.

Last year Schaeuble's predecessor, Peer Steinbrueck, called for governments to use "the whip" against Switzerland, while his party colleague Franz Muentefering of the center-left Social Democrats said that "in the old times one would have sent in troops" to combat tax havens. The remarks prompted outrage in Switzerland.

Merz has signed such double taxation agreements over the past 18 months with the United States, Britain and others to prevent the Alpine republic from being placed on an international list of uncooperative tax havens.

But most agreements leave open the issue of how to deal with legacy assets _ money that was deposited in Swiss accounts before the new rules came into force.

Switzerland has been pushing hard to get Germany to accept a special witholding tax on legacy assets that would allow account owners to remain anoymous and therefore escape prosecution. Swiss media have reported that such a tax could earn Germany a one-off windfall of several billions of euros (dollars).

The witholding tax could also apply to new accounts, effectively making Switzerland less attractive to tax evaders while safeguarding the country's tradition of protecting account holders' privacy.

On Monday, Merz and Britain Treasury chief George Osborne agreed to begin negotiations on a witholding tax for British residents with accounts in Switzerland.