November 29, 2012 5:51 pm
The rejection of a tax agreement with Switzerland by the upper house of Germany’s parliament is a welcome opportunity to revisit a deal that was too lenient on tax evaders and those who aid and abet them. The UK and Austria, which have struck similar deals with Bern, should also see the virtues of a tougher approach.
It no doubt served the political purposes of the social democratic and green opposition that enjoys a majority in the Bundesrat to scupper the government’s deal with the Swiss. The parties have made hay out of acting tough with rich tax cheats. North Rhine-Westphalia’s red-green government even paid for stolen lists of Swiss bank account holders, which earned its officials an indictment by prosecutors in Switzerland.
But political expediency does not mean that they are not right. On the contrary: Germans should be happy that, unlike in the other countries that signed similar agreements, a punchy opposition was able to puncture the government’s overly forgiving attitude to Swiss insistence on bank secrecy.
The deals are all cast in the same mould: the countries’ own tax authorities abdicate their task to Swiss banks, which will charge anonymous account holders a one-off fee on assets deposited in the past and a regular withholding tax on future income. This money – but not information about the owners’ identities – will flow back to the national treasuries to which the taxes were originally owed.
This is better than nothing, even if it may not make back what was originally owed. The sanctioning of anonymity, however, breaches a basic principle: not to grant cheaters a privilege – the ability not to declare their taxable income or assets to the proper authorities – denied to those who play by the rules. This is an injustice in its own right. It also raises the question of how the new agreement can be trusted to work in practice.
The unseemly haste displayed by the three governments in opting for quick money rather than applying patient pressure contrasts unfavourably with the American approach. By contrast, the US authorities insist on being told which American taxpayers squirrel money away in the Alpine refuge, and are prepared to make life insufferable for Swiss banks that operate in the US unless they comply with its wishes.
European countries can follow suit. If in the past a single country could legitimately worry that a crackdown would induce the tax-shy to move elsewhere, the international momentum against tax havens has changed the equation.
Germany should cease trying to secure assent for the deal through a parliamentary reconciliation procedure and instead drag the Swiss back to the drawing board. Playing hardball works: Swiss banks are edging towards closing accounts of clients who hide from the taxman. The UK, with its big financial centre, has even more leverage. It is reported to be piggybacking on US legislation to break the secrecy of its own Channel island dependencies. It should follow the US lead vis a vis Switzerland as well.
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