Tax haven crackdown flushes out German tax dodgers

BERLIN/ZURICH, April 8 (Reuters) - A crackdown on tax havens that prompted Switzerland to loosen its banking secrecy is encouraging more and more Germans to come clean about foreign accounts they use to evade taxes.

Berlin has waged a very public campaign to stamp out tax evasion since Klaus Zumwinkel, then chief executive of Deutsche Post and one of Germany’s top businessmen, was arrested in a major tax probe last February.

“Zumwinkel kicked off a bit of an avalanche,” said Andreas Boehm, a lawyer based in central Berlin. “Afterwards, the number of people coming clean with us ... rose by about 400 to 500 percent. And that level has been maintained.”

About half of these were people holding foreign bank accounts, chiefly in Switzerland and Liechtenstein, Boehm said.

Since the fall of Zumwinkel -- who received a suspended jail term for hiding money in Liechtenstein -- German Finance Minister Peer Steinbrueck has repeatedly attacked Germany’s two Alpine neighbours, accusing them of encouraging tax evasion.

In angry diplomatic exchanges that ensued, Steinbrueck sparked outrage last month when he compared tax havens to “Indians” running scared from the cavalry. A Swiss member of parliament hit back by likening the minister to a Nazi.

Roughly 30 billion euros ($40 billion) are lost to Germany every year due to tax evasion and at least 10 times this amount has so far been illegally parked abroad from Europe’s largest economy, according to calculations by the DSTG tax union.

Germans who come forward voluntarily must pay interest on top of what they owe but can escape prosecution provided they are honest about the extent of their cheating.

Switzerland, which has cultivated the tradition of discretion since the introduction of secrecy laws in 1934, manages close to a third of the world’s offshore wealth.


Amid mounting international pressure, Liechtenstein said last month it would commit to Organisation for Economic Cooperation and Development (OECD) standards on tax transparency and information exchange. Switzerland followed a day later.

Lothar Pues, a tax adviser at Essen-based Deutsche Steuerberatung GmbH, said media coverage of the issue had fuelled a jump in voluntary declarations of illegal holdings.

Previously, it was mostly Germans who held accounts in Liechtenstein who put their hands up, Pues said.

“But in the last two months we’ve seen a massive rise in people with money in Belgium and Switzerland doing so,” he said, noting that declarations had more than doubled in the period.

No nationwide statistics are available yet on how many have reported themselves or how much revenue has been recovered.

However, there had been a “major increase” in voluntary declarations in North Rhine-Westphalia -- Germany’s most populous state -- since Zumwinkel was caught, said Stephie Hagelueken, a spokeswoman for the state’s finance ministry.

And it was not just the rich making them, said lawyer Boehm.

“We’ve had cases extending from an old lady who was letting two rooms but didn’t declare the income right up to a successful doctor who dodged tax to the tune of a million euros,” he said.

Many coming forward tended to be older people worried about how tax evasion could affect their will, said Hartmut Schwab, a vice president of the federal chamber of tax advisers (BStBK).

“People simply have a bad conscience,” he said.

But whether there would be a lasting change in attitudes on tax evasion depended on the political response, he added.

“If concrete measures are adopted and these countries apply OECD standards, I think there will be a change of thinking because it will raise the risk of being caught,” Schwab said.

Greater tax harmonisation across Europe could also help reduce the temptation to cheat the system, he added.

Irrespective of recent developments, Switzerland’s position as a financial centre was unlikely to suffer in the long run, said Stephan Kuhn, a tax adviser at Ernst & Young in Zurich.

“Italy’s 2002 tax amnesty, which reportedly saw 60 billion euros return there, showed most of the money was transferred back to Swiss banks soon after,” he said. “This underlines the quality and value of Switzerland as a banking centre.” (Writing by Dave Graham; Editing by Jon Boyle)