"As much as half the assets stowed in Swiss banks, estimated by experts at $2 trillion, may be undeclared money" - iCharles de Boissezon, presently Chief Executive of Geneva-based Indian Hinduja private bank and former head of Switzerland's Banque Piguet.
Switzerland and Germany have signed a Supplementary Protocol that complements the tax agreement of 21 September 2011 - it would bring billions of extra Euros into the German national exchequer - Pakistan has yet not taken even an initial step towards such an agreement whereas the Indian government renegotiated its tax treaty with the Swiss government and from January 1, 2012 is now entitled to seek information for any hidden account. In Germany, there is still resistance from the Opposition - Social Democrat (SPD) Party - over this move.
The leader of SPD, Sigmar Gabriel said that his party would vote against the revised deal "when it goes to the Bundersat upper house of parliament, where Chancellor Angela Merkel's government needs opposition support to ensure passage". Gabriel described the deal as "a voucher for Persil washing powder for Swiss banks, to wash them white after they helped tax evaders".
In Pakistan, the Opposition has shown no interest in forcing the government to bring back the looted/untaxed money from Swiss and other banks - their demand to this effect is restricted to mere lip-service or just targeted against Asif Ali Zardari, whereas billions belonging to other tax dodgers are lying there as well. Opposition parties could have moved their own Bill in any of the houses of Parliament to exert pressure on the government, but their inaction speaks louder than mere rhetoric on the issue.
After strenuous negotiations, the German and Swiss governments have agreed to ratify the deal that could net the former billions of euros and end a diplomatic spat.
The salient features of the agreement are:
-- After the agreement has come into force, inheritances which occur will be covered. In the case of inheritance, heirs must consent either to collection of a 50% tax or disclosure.
-- In the case of flat-rate taxation of the past, the size of the tax burden has been increased. Instead of ranging between 19% and 34% as it was up to now, the tax rate is now at least 21% and no more than 41%.
-- In addition, the number of possible requests for information after entry into force of the agreement, has been increased from a maximum of 999 to a maximum of 1300 within a period of two years. This option extends and supplements the exchange of information according to the OECD minimum standard.
-- With the entry into force of the agreement on 1 January 2013, German taxpayers will no longer be able to shift assets out of Switzerland to third countries without notification. The appointed deadline was brought forward from 31 May 2013 to 1 January 2103.
-- It was made clear that interest payments which are covered by the Taxation of the Savings Income Agreement with the European Union or will be covered by this in future will be excluded from the scope of the agreement. In this way, the concerns of the EU Commission regarding compatibility with EU law have been removed as was the case with the tax agreement between Switzerland and the UK.
-- The regulations on the distribution in Germany of the revenue generated will be taken from the tax agreement. Within the scope of a German legislative procedure concerning the one-off flat-rate tax payment a higher proportion of the German Lander and communes will receive payment than would have resulted from the distribution key in the case of tax on investment income.
-- Individual models which come under the anti-abuse provision will now be described. In addition, monitoring implementation of the agreement by the competent Swiss authority and by an independent auditing company and the appointment of German Länder representatives on the so-called joint commission has been specifically laid down.
The latest German-Swiss Agreement not only respects the protection of bank clients' privacy applicable in Switzerland but also ensures the implementation of Germany's legitimate tax claims. Switzerland has agreed to a similar deal with Britain and is also in talks with Austria and Greece. The Swiss and German governments re-opened negotiations after the SPD rejected an initial deal signed last September, saying it was too lenient on tax dodgers. On April 5, 2012, they announced tougher terms, which met some but not all of the SPD's demands. "The talks have been fairly heated recently," Swiss Finance Minister, Eveline Widmer-Schlumpf, told a news conference in Bern. "I think we have found a fair compromise and a good solution for both sides," she added.
The dispute over tax evasion has strained ties between the two countries, and Switzerland said on April 5, 2012 that it had issued arrest warrants for three German civil servants, accusing them of industrial espionage for buying the bank details of German tax evaders. Switzerland's bank secrecy code has helped it build a $2 trillion offshore financial sector, and a pact with Germany would protect this banking tradition in return for a punitive Swiss-levied tax on German-held accounts. Under the revised terms, the German finance ministry said that the countries had agreed to raise the retroactive levy on German funds stashed away in Swiss bank accounts to a rate between 21% and 41%, from a previously agreed range of 19% 34%. They also agreed to a one-off tax of 50% for people who inherit Swiss bank accounts and do not want to declare them, the finance ministry said.
Under the revised deal, Germans will have to alert the Swiss authorities when they move their money out of Swiss bank accounts from January 1, 2013, versus a previously agreed May 31, in order to prevent an exodus into other offshore accounts. The legislation will likely now be put to Merkel's cabinet in May but will only face a vote in the Bundersat after the summer, once two regional elections which the SPD hopes to win, are out of the way. The government has been operating under the assumption that some SPD states could drop their opposition after those elections, particularly as big states such as North Rhine-Westphalia stand to gain much-needed tax revenues, in some cases more than a billion euros. Germans hold an estimated 150 billion Swiss francs in Swiss accounts. (To be continued tomorrow)
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