Swiss, Germans to sign tax deal

ZURICH: Switzerland and Germany will sign a deal to regularise untaxed money stashed in secret Swiss bank accounts on Aug. 10, media in the two countries reported on Sunday.

Strict banking secrecy, which helped Switzerland build a multi-trillion dollar offshore banking industry, has come under heavy fire and strained relations between Switzerland and other countries seeking to hunt tax cheats.

Swiss authorities have been in talks with counterparts in Germany and Britain over tax deals for months. Outline deals were agreed last year, but one of the main sticking points has been how to tax funds that have been stashed away for many years.

Swiss banks are likely to have to pay an up-front advance payment to the German government, which will only be reimbursed if their clients pay back-taxes they owe to the German authorities.

In future, the Swiss banks will levy a withholding tax on income earned by assets belonging to German customers. Germans' undeclared assets held in Switzerland are believed to total 200 billion Swiss francs.

German magazine Der Spiegel and Swiss newspaper SonntagsZeitung both said a deal was expected on Aug. 10. But they gave widely varying figures for the minimum revenue that Swiss banks would guarantee to the German tax authorities.

The SonntagsZeitung said Swiss banks would pay 2 billion Swiss francs ($2.55 billion) to ensure German clients with undeclared funds would step forward, while for Britain that figure would be 500 million francs.

Should Germany receive at least 4 billion francs in back taxes, the 2 billion francs would be returned to the banks, the SonntagsZeitung said.

However, German news magazine Der Spiegel said that Swiss banks would have to guarantee Germany would receive a minimum of 10 billion euros ($14.4 billion). Earlier this month, German newspaper Handelsblatt cited a figure of 14 billion euros.

A German finance ministry spokeswoman declined to comment on the reports, saying the details of the Swiss-German talks were confidential. "The negotiations are well advanced, but not yet concluded," she said.

UBS , Sarasin, the Swiss Bankers Association and the Swiss finance ministry were not immediately available for comment. Credit Suisse and Julius Baer declined to comment.

The SonntagsZeitung cited a Swiss finance ministry official as declining to comment.

Several Swiss banks have been in the crosshairs of foreign tax authorities after UBS promised in 2009 to hand over 4,450 account names to settle a US tax probe. Julius Baer paid to settle with German authorities, which have also raided the offices of Credit Suisse.

One of the other elements of the deals that have not yet been announced is how high the withholding tax on interest and dividend income for future earnings will be.

The SonntagsZeitung said the level of the withholding tax, which will allow Switzerland to preserve banking secrecy by forgoing the automatic exchange of information, was not yet known.

Der Spiegel said that this was likely to be 26 percent, roughly reflecting the current rate of tax charged on such income in Germany. Pre-existing assets would face one-off levies of 19-36 percent, depending on the original source of the income, Der Spiegel added.

Moreover, Swiss banks were still sparring over how to divide up the one-off payment to the German tax authorities.

Copyright Reuters, 2011