German finmin in last ditch bid to save Swiss tax deal-Spiegel

BERLIN Sun Nov 18, 2012 7:47am EST

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BERLIN Nov 18 (Reuters) - Finance Minister Wolfgang Schaeuble will offer Germany's federal states a financial incentive to try to stop opposition parties blocking a tax evasion deal with Switzerland in a vote in the upper house this week, a German magazine reported.

The opposition Social Democrats (SPD) have vowed to block the deal, which would net Germany billions in tax revenues, in Friday's vote. The party says it is too soft on tax dodgers.

A defeat would be an embarrassment for conservative Chancellor Angela Merkel who has already had to amend a previous deal due to SPD demands. Tortuous negotiations with Switzerland have dragged on for years.

Der Spiegel reported that Schaeuble, at Merkel's behest, will effectively offer the Germany's states about 3 billion more in tax revenues by saying the federal government will forego the amount it had earmarked for itself. It cited no sources.

If the bill goes through, Germany expects Switzerland to pay Germany about 10 billion euros in compensation for lost taxes. Originally the central government was to take about 30 percent of that with the states receiving 70 percent.

"We want to make clear that the deal should not fail because of money," Spiegel quote a chancellery source as saying.

A finance ministry spokeswoman rejected the report as speculation.

Germans hold an estimated 150 billion euros in undeclared money in Swiss accounts. The agreement would require Swiss banks to levy a punitive charge and to tax future income, with the proceeds passed on to Germany.

However, the identity of account holders would remain secret, a point the SPD opposes. It also argues that the bill allows people to move their money from Switzerland before the deal takes effect.

The Bundestag lower house has already approved the bill but it has to go through the upper house, where Merkel's centre-right coalition lacks a majority.

Germany's states, including North Rhine-Westphalia which is ruled by the SPD and Greens, have sought to catch tax dodgers by buying from whistleblowers CDs with details about Germans who have stashed cash in secret Swiss bank accounts.

Last week, German state prosecutors began a search of the premises of clients of Swiss bank UBS suspected of tax evasion. It is just one of several banks, also including Credit Suisse, caught up in investigations into personal tax evasion in the United States and Europe. (Additional reporting by Thomas Seythal; Writing by Madeline Chambers; Editing by David Cowell)

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