German Lawmakers Reject Swiss Tax Deal

PARIS — Switzerland was stymied Friday in its drive to reach a tax deal with Germany after opposition lawmakers in Berlin rejected an agreement that would have allowed Germans with Swiss accounts to pay taxes without divulging their identities.

The Swiss government has been trying to repair relations with its European neighbors and the United States, which have been pressuring it to lift the veil on its vaunted bank secrecy. The German opposition lawmakers argued that the proposed law was too lenient on tax cheats and would not fully restore the revenue Germany was losing. They were perhaps also unwilling to hand Chancellor Angela Merkel a victory on the issue before elections next year.

Social Democrats and Green Party members of the German upper house of Parliament, the Bundesrat, voted largely along party lines to block adoption of the proposed tax agreement. The measure had already passed by a wide margin the Bundestag, the lower house, where Chancellor Angela Merkel’s Christian Democrats and its partners hold the majority.

“If the deal had passed, tax dodgers and their accomplices would have let out a sigh of relief,” Norbert Walter-Borjans, a Socialist member of the Bundesrat and finance minister for the state of North Rhine-Westphalia, said in a statement. “Now it’s the honest taxpayers that can exhale.”

Mr. Walter-Borjans’s state has on several occasions resorted to buying Swiss account data from whistle-blowers (or thieves, as the Swiss see them) to go after German tax dodgers.

The deal, to which the Swiss had already agreed, would have gone into effect Jan. 1. It called for Swiss banks to make an upfront payment to the German Treasury of 2 billion Swiss francs, or $2.1 billion. Those funds ultimately would have been reimbursed to the banks from Germans’ undeclared accounts in a one-time payment of up to 41 percent of the account’s value. The clients would thereafter have paid their taxes anonymously, at German income tax rates.

German officials would have had access to additional data, but the fact that client names would remain hidden behind the curtain of Swiss secrecy would have left Germany’s federal and state governments depending on the good faith of Swiss banks to collect taxes on their behalf.

The future of the deal, nearly two years in the making, is uncertain. Swiss officials fear that the issue could be lost in German politics until after the election, sometime in the second half of 2013.

Wolfgang Schäuble, the German finance minister, will propose that a reconciliation committee of the upper and lower houses discuss ways to salvage the agreement, Silke Bruns, a ministry spokeswoman, said. She cautioned, though, that there was no guarantee that Parliament would agree to Mr. Schäuble’s plan.

“We’re convinced the Swiss deal is a good solution,” Ms. Bruns said, “and that’s why we’re pushing for it.”

While the parliamentary defeat might have been an embarrassment to Ms. Merkel, it was a major setback for Switzerland’s banks, which have been laboring under a deep cloud of uncertainty since 2008. A tax deal with France that had seemed locked up is being reopened at the request of the French.

Relations with Washington remain the biggest source of Swiss concern, after the U.S. Justice Department indicted 11 Swiss financial institutions on suspicion of aiding Americans in evading taxes. U.S. officials have so far shown little interest in negotiating anything short of the surrender of all information on the banks’ American clients. Some German opponents of the proposed Swiss agreement have called on Berlin to take a similar hard-line approach.

The Swiss Bankers Association expressed its “regret” at the Bundesrat’s decision, but said: “We consider it positive, however, that the upper house has rejected the tax agreement for reasons of purely domestic policy and not for objective reasons.”

Mario Tuor, a Swiss government spokesman, noted that without a deal, the status quo would remain: German officials can seek specific information from the Swiss government on suspected tax cheats — or go back to buying data stolen from Swiss banks.

“With an agreement, every German taxpayer in Switzerland would be taxed,” Mr. Tuor said.

The Swiss government “remains prepared to bring the ratification process with Germany to a successful conclusion,” Eveline Widmer-Schlumpf, the Swiss president and finance minister, said in a statement, noting that “there are no obstacles to ratification on the Swiss side.”

Chris Cottrell contributed from Berlin.

Article source: http://www.nytimes.com/2012/11/24/business/global/24iht-swisstax24.html?partner=rss&emc=rss