Electioneering threatens German tax deal

Patrick Odier of the Swiss Bankers Association and State Secretary Michael Ambühl recently tried to convince German senators of the accord's virtues Keystone

The German-Swiss tax deal aimed at legalising undeclared assets held by German citizens in Swiss banks may not face a referendum in Switzerland, but there are no guarantees the accord will be ratified by Germany’s Senate with elections looming.

Media in both countries noted that after backers of a referendum against the so-called Rubik accords with Germany, Britain and Austria failed to gather enough signatures to force a vote, it was a sign that most Swiss agreed with the deals.

The Neue Zürcher Zeitung’s Berlin correspondent wrote that this result was welcomed in German government circles, adding that there was  “coalition of common sense” in both countries that recognised the advantages of the accord.

Any danger for the deal does not lie within the cabinet in Berlin, nor in the lower chamber of parliament, where the majority is safely in the hands of the government coalition, but in the Senate, which is the chamber where Germany’s federal states are represented and is dominated by the centre-left and the Greens.     

This majority seems intent on refusing the accord, according to Bonn University political scientist Gerd Langguth.

“The Swiss ambassador to Germany has been extremely active and has been trying to talk to all parties involved, but the Senate majority is unlikely to change its position,” he told swissinfo.ch.

Langguth points out that with elections looming, the centre-left Social Democrats are not just going to oppose the treaty, but will also take the opportunity to score points against Chancellor Angela Merkel’s government. 

“If the opposition can get some mileage out of an issue, such as this tax accord, they will seize the opportunity,” the political scientist points out. “In Germany, there are plenty of people who are opposed to Swiss banking secrecy as they feel the state has been cheated.”

The treaty would legalise the undeclared Swiss bank accounts held by Germans citizens. Swiss banks would deduct a one-off levy for backdated assets and then impose a withholding tax on future income earned for those account holders who do not want to reveal their identities to the German authorities.

With the Social Democrats sensing that tax justice interests voters, they have made it into an election issue. A number of federal state premiers, as well as the official candidate for the Chancellery, Peer Steinbrück, have repeated in the past few days their opposition to the accord.

After being nominated, Steinbrück warned that the Swiss must do more to fight German tax evasion, adding that it was an issue of German – and not Swiss – sovereignty. He pointed out that tax evasion was not considered a minor offence by the Social Democrats.

No backing down

Langguth says that it is unlikely the Senate majority will back down, even if in theory it is possible to hammer out a deal that both chambers of the German parliament could accept with the government acting as a facilitator.

Normally this would involve some horse trading with the federal states to reach some kind of agreement, as has been the case in the past.

But for Langguth, this is not really an option. The Social Democrats have nailed their colours to the mast and left no room for negotiation, he says. Enough to doom the accord with the Swiss.

According to the German-language correspondent for Swiss public radio in Berlin, government sources have confirmed that a new deal is being negotiated by diplomats, but also that a revised accord would demand a significant new concession from Switzerland.

The original tax agreement was already upgraded in Spring. Swiss President Eveline Widmer-Schlumpf has repeated recently that there would be no further concessions and that the text of the treaty should not be modified.

Any discussions taking place now would be to find ways of preventing Germans who hold undeclared assets in Switzerland from moving them to another location. Any solution would however have to avoid involving any major changes to the Swiss position, a situation that leaves little room for discussion, according to the radio correspondent.    

The Swiss foreign ministry still hopes a majority of the German federal states will accept the accord as it is.

In a statement, it writes that most of the states dominated by the Social Democrats have yet to determine their position on the deal, adding that the German government is backing the agreement strongly and believes ratification is possible.

German tax deal timeline

March 13, 2009: Following pressure from the Organisation for Co-operation and Development (OECD), the Swiss government agreed to adopt OECD standards on administrative assistance in tax matters. By doing so, Switzerland agreed to offer assistance not only in cases on tax fraud, but also in some cases of evasion. Since then, Switzerland has renegotiated double taxation treaties with more than 30 countries.

June 22, 2009: Former Swiss Finance Minister Hans-Rudolf Merz and his German counterpart Peer Steinbrück agreed on revisions to the double taxation treaty between the two countries.

September 21, 2011: Current Swiss Finance Minister Eveline Widmer-Schlumpf and her current German counterpart Wolfgang Schäuble signed a Rubik withholding tax agreement in Berlin. The German Social Democratic Party (SPD), Greens and other left leaning parties criticised the proposed regulations as being too soft on tax cheats.

March 5, 2012: The European Commission warned that the Rubik treaties with both Germany and Britain contained elements that violated EU rules and in particular clashed with an existing withholding tax agreement between the EU and Switzerland.

April 5, 2012: Switzerland and Germany revised their deal including a provision to increase tax rates on undeclared legacy assets.

April 17, 2012: The EC gives the revised deals with Germany and Britain (which was also altered to meet objections) the green light. The agreements were passed as being “fully in line with EU laws”.

April 25, 2012: The German government approved the revised deal, but the SPD and Green parties determined to fight against its implementation in parliament.

June 2012: Following a positive vote in the Swiss Senate, the House of Representatives passed the treaty. However, the Young Socialist and the rightwing Cins group launched a referendum to oppose the deal

(Adapted from German by Scott Capper)