German states seek tougher penalties for tax evaders who turn selves in

BERLIN, March 27 Thu Mar 27, 2014 12:47pm EDT

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BERLIN, March 27 (Reuters) - German states want to clamp down on tax evaders who turn themselves in to avoid criminal prosecution with a proposal to reform tax evasion rules that could form the basis of a new national law.

The 16 state finance ministers agreed the penal surcharge for tax evaders should rise to 10 percent for sums of more than 50,000 euros from 5 percent charged now. Tax evaders already have to pay 6 percent interest on all taxes evaded.

They agreed the proposals in Berlin on Thursday, after an outcry over existing rules that allow tax evaders to avoid prosecution if they turn themselves in before being caught.

The states want to continue to allow people to turn themselves in but tighten the rules. They want to extend the statute of limitations to 10 years from the current five.

The moves to tighten the rules come after a German court convicted Bayern Munich president Uli Hoeness of tax evasion this month and sentenced him to 3-1/2 years in jail in a case that led to a wave of tax evaders coming clean.

"We will increase the pressure on tax fraudsters. It should be clear to everyone now that this is more than a misdemeanour," said Carsten Kuehl, finance minister for Rhineland-Palatinate and coordinator for the Social Democrat (SPD)-led states.

The federal states, together with the Germany's Bundestag lower house of parliament, decide on tax legislation. The states will draw up a draft law that will ultimately need the Bundestag's approval.

The federal government signalled it supported the states' stance.

"We must not allow voluntary disclosures to be an easy way out for tax evaders," Michael Meister, a deputy finance minister, said.

The states did not agree on tougher penalties on evaded sums smaller than 50,000 euros but states run by coalitions of the Social Democrats (SPD) and Greens said they wanted to start applying penal surcharges on sums of more than 5,000 euros.

Some states also want to set an upper limit above which a voluntary disclosure no longer protects evaders from a prison sentence.

"Gone are the golden days for tax evaders," said Monika Heinold, finance minister for the state of Schleswig-Holstein and a member of the Greens. She said this was "the last call" for tax evaders who use voluntary disclosures in their current form. (Reporting by Matthias Sobolewski; Writing by Michelle Martin; Editing by Alison Williams)

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