BERLIN: Germany and Switzerland scrambled on Friday to salvage a landmark deal on taxing secret offshore accounts after the main German opposition party raised 11th hour objections to a compromise plan it branded full of "loopholes".
Germany and its tiny Alpine neighbour want to conclude by this weekend a pact that would protect Switzerland's tradition of banking secrecy cornerstone of its $2 trillion financial services industry by taxing wealthy Germans' Swiss accounts and levying a high interest rate on undeclared money.
But Chancellor Angela Merkel's centre-right coalition needs the backing of states controlled by the opposition Social Democrats (SPD) to ensure the tax deal wins approval in Germany's upper house, the Bundesrat.
SPD state premiers, who blocked an original deal last year as too lenient to tax dodgers, discussed concessions proposed by the Swiss on Thursday but decided they did not go far enough.
"We still have big problems with this agreement," Hannelore Kraft, SPD premier of North Rhine-Westphalia, Germany's most populous state, told the Bundesrat.
"Switzerland has moved. But there are still far too many loopholes," she said, commenting on the proposed amendments. "Here lies the money of people who have evaded taxes and the question of how we deal with this is a fundamental one of justice."
The Swiss finance ministry said it had updated its proposals for a deal and asked for further clarity from Germany on the issue by the end of March to allow a new treaty to come into force from April 2013.
The German finance ministry said it too was working hard to finalise a compromise by a weekend deadline.
"Not to get a deal is the worst possible outcome for us, so in that sense we will do everything, we will not rule out any talks, in order to get a good result," a German finance ministry spokeswoman told a news briefing.
The spokeswoman said a March 31 deadline on the Swiss side was "unchanged". Asked if a deal by April 1 was still possible, she said: "We're working on it"
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