EU Savings Tax Amendments News up to 28 November 2012

Go to << previous news Go to current news >>

Date Progress on Amended Savings Tax Commentary

Go to current news

This news page is not the current news page

Go to current news >>

Reset your bookmarks if you are land up here.

28 Nov 2012

German govt bids to save Swiss tax deal.

German Finmin wants mediation to save deal

The German government has attempted to salvage a tax deal with Switzerland worth millions of euros which was blocked in a political battle over how much tax the wealthy pay.The government on Wednesday referred the deal to a special mediation committee after it was thrown out by opposition-run federal states in the upper house Bundesrat last week.

Championed by Finance Minister Wolfgang Schaeuble, the agreement would have allowed Germany to tax assets stashed away by its citizens in Swiss bank accounts.

The opposition Social Democrats (SPD) and Greens, keen to make taxation of the rich an issue in campaigning for next September's federal election, argued that the legislation would have let off tax evaders too easily.

"In the mediation committee good sense and the strong reasons for this deal should win out," government spokesman Steffen Seibert told reporters at a regular press conference on Wednesday after the weekly cabinet meeting.

"The government is convinced this deal is a good thing, that we cannot achieve anything better and that it offers good solutions for the future and for the past. We are prepared to discuss things and we trust there is the same willingness on the other side."

The deal is due to take effect from the start of 2013. The mediation committee includes members of both German houses of parliament.

"It is in Germany's interests for this deal to go through," Seibert added.

Chancellor Angela Merkel's centre-right government struck the pact with Switzerland in April but without a majority in the Bundesrat, where Germany's 16 states are represented, it needed opposition support.

The deal would have required Swiss banks to levy a punitive charge on an estimated 150 billion Swiss francs in undeclared funds squirreled away by Germans in Swiss accounts. Future holdings by German citizens would be treated on a par with those held in Germany.

The proceeds would be passed on to Germany, including its 16 Laender, or states, without the identities of the account holders being revealed.

The chances for mediation to succeed appear slim, however, with the SPD dead-set on torpedoing the deal. In addition, as the legislation is already fully ratified in Switzerland, there is little room for changes.

25 Nov 2012

Rubik supporters still base hopes for the German mediation committee 14 December.

The bilateral deal with Switzerland had won ministerial approval and cleared Germany's lower house of parliament, the Bundestag, but it was blocked on Friday in the upper house, the Bundesrat, where Germany's 16 regional state governments are represented.

Opposition to the tax proposal came from opposition Social Democratic Party (SPD) and the Greens, who form coalition governments in several of Germany's key states, including the most populous, North Rhine-Westphalia, and Baden-Wuerttemburg.

In reaction, German Finance Minister Wolfgang Schäuble who had advocated the deal, said he planned next Wednesday to submit the bill to a committee which arbitrates between the two chambers.

Flog dead horse
Optimist to the end

24 Nov 2012

“The concept of a withholding tax has failed”.

Most Swiss newspapers have given the last rites to the withholding tax model, following the “no” from the German upper house of parliament to a tax treaty aimed at legalising undeclared assets held by Germans in Swiss banks.

Only the Neue Zürcher Zeitung (NZZ) still had faith in the “ingenious withholding tax system”.

Switzerland had done its homework, the paper said, and developed a suitable tax model – “it’s therefore worthwhile to fight for such a solution”. It pointed out that Britain and Austria, with whom Switzerland had signed similar agreements which are set to come into force on January 1, considered this approach purposeful.

Nevertheless, the NZZ said it was clear that “for the time being the meaningful construct of a withholding tax remained built on sand” and that the foundations of the agreement with Britain and Austria “couldn’t take a lot of weight”.

On Friday, the opposition German Social Democrats (SPD) and the Greens voted against the agreement with Switzerland, saying it had too many loopholes and that it went against tax equity.

A mediation committee of the two chambers of parliament is expected to meet next month to thrash out a compromise, in a bid to pave the way for the accord to take effect from January 2013.

“Time for a change”

The Basler Zeitung feared that if the accord failed for good, Britain and Austria could also bale out, which would result in “the introduction of efforts coordinated across Europe for the automatic exchange of information”.

For the Tages-Anzeiger in Zurich, it was therefore “time for a change in strategy”.

“The concept of a withholding tax has failed,” it said. “The Swiss model doesn’t work abroad. On the contrary, Switzerland will soon sign an agreement with the United States that foresees a sort of one-sided exchange of data.”

The accord with Germany, already approved by Switzerland, would impose a retroactive levy of up to 41 per cent on capital in offshore bank accounts held by foreign citizens, impose a tax on future interest income and allow the account holders to remain anonymous.

The German government estimates revenue from tax arrears under the deal at €10 billion ($12.9 billion) and an additional €700 million annually from withholding tax, but the opposition dismissed the figures as exaggerated.

So what to do? For the Tages-Anzeiger, “Switzerland should start negotiating as soon as possible a tax amnesty for the past and an automatic exchange of information for the future”.

The Südostschweiz also believed that the “withholding path would no longer lead very far. The signs are pointing to the automatic exchange of information”.

Blame game

The Südostschweiz lay the blame for the failure with the Swiss government, which “not only misjudged the mental state of Germans, but also [the Swiss government’s] ignorance meant it had missed chances to get the most out of the situation in its own interest”.

For the St Galler Tagblatt, however, “at first glance Germany is the loser”, pointing to the billions it will miss out on given the statute of limitation concerning tax evasion.

Der Bund in Bern said the SPD was playing high-stakes poker. “[The SPD] wants the automatic exchange of information. Germany might get this in ten years, but in the short term it can’t force its southern neighbour to hand over every piece of information on the investments of German citizens. For the moment, a withholding tax is the best solution.”

For the Berner Zeitung, the SPD and the Greens had “to a marked extent built up the issue as one of justice. In the Swiss banks, politicians of these two parties had the perfect villains which they could lay into – an electorally rewarding strategy. In such an environment, the agreement could only fail.”


Most papers in the French-speaking part of the country were also doubtful for the future of the withholding tax.

“The time has come for Plan B,” reckoned Le Temps in Geneva, adding that this officially didn’t exist. “During the negotiations this attitude made sense – now it doesn’t.”

La Tribune de Genève was a bit more optimistic. “Yes, this is a loud warning shot, but Germany isn’t the only country involved. The agreement with Britain and Austria enters into effect on January 1,” it reminded readers. Le Quotidien Jurassien balanced out this optimism, saying German politicians had squeezed as much capital out of the controversy as possible.

“Bern and Berlin continue to believe in a mediation committee miracle, but in the current political climate before the elections [in Germany next autumn], such a miracle is an illusion.”

Rubik sink loopholes

23 Nov 2012

German upper house rejects Rubik tax agreement with Switzerland .

Germany's upper house of parliament on Friday rejected a deal with Switzerland to tax assets stashed by German citizens in Swiss bank accounts.

Despite a last ditch appeal to the assembly by Finance Minister Wolfgang Schaeuble the agreement was rejected by lawmakers in states run by the opposition Greens and Social Democrats, who said it lets off tax evaders too easily. Chancellor Angela Merkel's centre-right government no longer has a majority in the Bundesrat upper house of parliament.

The tax deal could still be salvaged in a mediation procedure that seeks to resolve differences between the Bundestag, the lower house of parliament, and the Bundesrat, but the chances of that happening are slim.

German Lawmakers Reject Pact on Undeclared Swiss Accounts.

The Bundesrat, controlled by the opposition parties after state election losses by Chancellor Angela Merkel’s Christian Democrats, voted to block the agreement signed by the two nations last year. The exact result of the vote today in Berlin wasn’t disclosed. Enlarge image German Lawmakers Reject Pact on Undeclared Swiss Bank Accounts

The collapse of an accord that would have imposed a withholding tax on offshore accounts held by Germans is a setback for Swiss banks as they try to stem withdrawals by European customers concerned about a widening hunt for tax dodgers. Germany’s opposition Social Democratic and Green parties have said the agreement contains too many loopholes for tax evaders and keeps client identities secret.

Thomas Schaefer, finance minister of Hesse state, said in a speech to the Bundesrat today that Germany may lose 13 billion euros in tax revenue next year without the treaty accord.

Rubik AA

22 Nov 2012 (v)

Italo-Swiss Tax Deal Expected In December.

Following confirmation earlier this month by the Italian Minister of the Economy Vittorio Grilli that Italy is working towards a tax treaty with Switzerland, possibly by the end of this year, the Head of the Markets Division of the State Secretariat for International Financial Matters in Berne, Oscar Knapp has indicated that its signature could take place by December 21.

Discussions on a treaty commenced in May this year, with a bilateral working group being established to carry forward the negotiations. It has also, so far, involved two meetings between Swiss President Eveline Widmer-Schlumpf and Italian Prime Minister Mario Monti in June and August this year.

As has been confirmed, the parties are talking about an agreement on the regularization of assets already held in Switzerland by non-resident taxpayers, through the payment of a fixed tax rate, and the introduction of a withholding tax on future investment income and capital gains, such as has already been concluded with Switzerland by other European Union countries.

While it is expected that, under the agreement, Italian holders of Swiss accounts will remain anonymous, the Swiss authorities will undertake that they will be subjected to the rate of withholding tax agreed between the two countries in the future.

It has been suggested that the additional tax revenue that would be available to Italy if it were to agree such a deal, on estimated undeclared Italian funds in Switzerland of up to EUR160bn (USD204bn), could amount to some EUR40bn up-front, with other significant funds paid annually thereafter.

The discussions have also covered the necessary modifications that would need to be made to the (previously agreed but uncompleted) double taxation agreement between the two countries, particularly with regard to the exchange of tax information so that Switzerland could be taken off the Italian 'black list', together with possible changes to the existing agreement on the taxation of Italian cross-border workers.

Following finalization of the text of the agreement, it will then be subject to ratification by both countries’ parliament.

22 Nov 2012 (iv)
Swiss cheese
The message about Rubik's loopholes now obviously understood by all

22 Nov 2012 (iii)
Rubik bet
What will Swiss do now that Germany rejects Rubik?

22 Nov 2012 (ii)
Rubik monkey
It is expected Swiss will promote white money strategy after Rubik is rejected by Germany

22 Nov 2012
Rubik if truth told

21 Nov 2012 (ii)

France: Exchange on demand with blocked by Switzerland .

Google translation from French
Switzerland freezes over 200 French applications for tax assistance:

Administrative assistance between the two countries, supposedly catches more than ever against tax evasion. In Paris however, the tone turns sour against Bern's "reluctance". There is now a "problem of trust" between Bern and Paris. The diagnosis is made by a senior French official, irritated by the inability of Switzerland to unmask the French who hide money in Swiss banks. The situation also concerns some Swiss bankers: they feel it discredits efforts financial industry to exchange information.

French sources indicate that Paris sent to Bern since 2011, "hundreds of requests" for administrative assistance to obtain bank information on suspected tax evaders. However, "very few answers" have returned, despite the commitment made in 2009 by the Swiss banks to deliver delivered abroad on tax evasion.

According to information obtained by The Times, the number of French demands now approaching 300, and only 40 - 50 answers were satisfactory to Paris. The previous figure was 80 requests sent and 20 responses, suggesting that blocking has worsened since last year.

The case will be the agenda of the presidential visit Eveline Widmer-Schlumpf in France, which should take place before the end of the year. "I cannot guarantee that we will discuss this issue with François Hollande, said a French speaker, but the subject is placed on preparatory meetings."

Blocking assistance was discussed during a visit by Secretary of State Yves Rossier in Paris on October 26. There's also been talk of the bilateral agreement on the taxation of inheritances. This text arouses strong resistance in Switzerland, where it is considered too favorable to France. Berne wants amenities that facilitate its ratification in parliament. But the French, annoyed by blocking assistance are reluctant to make concessions. A Bercy, the new Director General of Public Finance, Bruno Bezard, was surprised by the Swiss private opposes "strong resistance" to support the tax.

What stuck, it is the practice to inform the Swiss taxpayer covered by an application for its French assets in Switzerland. For France, the assistance procedure must be kept secret, and the client must be informed at the end, when all the evidence has been gathered against him. Switzerland, states it has a legal duty to warn the client earlier, during the procedure. The disagreement between the two states is that in the majority of cases, assistance is blocked.

Another explanation for the inactivity criticized Swiss is the lack of manpower. The Federal Tax Administration has only a handful of employees - six to eight at the most - to treat hundreds of requests for mutual foreign tax. In late October, the Federal Council approved the hiring of eight additional staff to facilitate the processing of applications including French. The job should be published next month. Then we are assured in Bern, "we will be able to process these requests very quickly."

Swiss Tout Exchange on Demand as Helpful

21 Nov 2012

Credit Suisse to manage only taxed assets.

GENEVA: Swiss banking giant Credit Suisse wants to clean house and remove all tax evaders from its clientele, bank chairman Urs Rohner said in an interview published on Wednesday.

"It is clear that a business model based on untaxed assets has no future," Rohner told the Swiss-German daily Tages-Anzeiger when asked about a pending tax deal between Bern and Berlin.

The deal, which will require Swiss banks to deduct taxes from German clients and transfer the tax revenues to Berlin -- thus allowing the clients to remain anonymous, is to be voted on by the upper house of the German parliament on Friday.

It is expected to be rejected though, since a majority of the Bundesrat has voiced opposition, deeming the deal is too lenient on tax evaders.

Rohner said it would be a shame if the deal did not go through.

"In my view, it would be a very good agreement for all those involved," he said, stressing the deal would help smooth relations between the two countries which have become tense amid allegations that Swiss banking practices are helping Germans hide billions of euros.

The Bundesrat should pass it as quickly as possible, he said, pointing out that "every day (without a deal) possible tax claims are slipping away."

But if the treaty is rejected, Credit Suisse does not intend to allow tax evaders to remain on as clients, he stressed.

If potential clients refuse to report their assets to the tax authorities in their countries, "the bank will clearly tell them that it does not want their business," Rohner said, adding that the bank would also ask existing clients to leave if they did not declare their assets.

If ratified, the tax deal is set to take effect on January 1 next year, and will entail taxation rates of between 21 and 41 percent on German assets held in Switzerland.

Switzerland has reached similar deals with Austria and Britain and is negotiating deals with Greece and Italy.

Swiss clean money strategy
How Swiss banks ensure your money is clean

20 Nov 2012 (v)

Italy: Not so fast with Rubik agreement as it hits some bumps.

Any tax agreement between Italy and Switzerland should not take the form of an amnesty, Italian Economy Minister Vittorio Grilli said on Tuesday.

"It can't be a type of pardon or amnesty," Grilli told reporters in Brussels. "If there is an agreement it has to be done well in the interests of everyone". He said he did not know if a deal would be reached by the end of the year, noting that there were still disagreements over transparency, money laundering and information exchange.

Italy held its first talks with Swiss officials in May. A deal could net Rome billions of euros of much needed revenue as it battles to lower its debt mountain and emerge from a deep recession

20 Nov 2012 (iv)

OFFICIAL ANNOUNCEMENT: German-Swiss tax agreement to fail.

Social Democrats and Greens, the main opposition in the lower house, have an effective majority in the upper house and can block the treaty's passage.

The states reject the treaty because they say it doesn't force Swiss banks to identify German citizens who own secret Swiss bank accounts. By protecting the identities of German citizens, the treaty provides little assistance to German tax authorities in their investigations of alleged tax evasion.

"The red- and green-led states in the Bundesrat will unanimously reject the current treaty with Switzerland," Norbert Walter-Borjans, finance minister of the state of North Rhine-Westphalia, said in a statement.

German Finance Minister Wolfgang Schaeuble on Tuesday argued that given the tough negotiations and Swiss resistance to sacrificing its cherished bank secrecy, the government was able to obtain the best deal possible at the time. Allowing the treaty to fail would mean giving up potential tax revenue that Swiss authorities have agreed to hand over to German authorities from the accounts of German citizens in Switzerland. He called for the upper house to support the measure.

"There is no rational motive; there is only a motive based on partisan politics to block something on the basis of cheap polemics," Mr. Schaeuble said in a speech to German parliament.

The tax treaty, reached between the two nations in April and intended to go into effect at the beginning of 2013, would levy a one-time charge of between 21% and 41% of the value of assets held by German citizens in anonymous Swiss accounts. It would also institute a 26.4% withholding tax on any new capital gains. The German government estimates that the accord could yield up to €10 billion of revenue for Germany in its first year.
With the next general election less than a year away, the states led by the SPD and Greens are showing no sign of giving up their opposition to the tax treaty. North Rhine-Westphalia, Germany's most populous state, has led the charge to block the tax treaty and has angered the Swiss government by purchasing stolen compact discs containing details from the secret Swiss bank accounts of German citizens.

Using the information from those CDs, German tax inspectors earlier this month launched a nationwide raid on German citizens who were customers of a German subsidiary of the Swiss bank UBS on suspicion of tax evasion. Separately, German prosecutors in Mannheim have launched an investigation against employees of UBS Deutschland on suspicion of aiding tax evasion.

EU stomp on CH
After Rubik rejected?

20 Nov 2012 (iii)

Germany's SPD want a whole new withholding tax agreement with automatic exchange of information

The SPD party envisages a victory in the general election of 2013 and negotiating new tax treaties with Switzerland. In it, the country would commit to comprehensive information, said the parliamentary secretary of the SPD parliamentary group, Thomas Oppermann, in Berlin.

The U.S. has shown in their negotiations how to prevail against Switzerland. Even in Germany the pressure on Swiss banks has to to be increased. Oppermann said he was confident that the Federal Council on Friday will finally bring the agreement negotiated by the federal government tax agreement with Switzerland to fall.

Germany stampede with AEI

20 Nov 2012 (ii)

Germany's Schaeuble warns opposition veto on Swiss tax deal

German Finance Minister Wolfgang Schaeuble has warned opposition parties against blocking a deal to tax assets stashed by German citizens in Swiss bank accounts ahead of a vote in parliament's upper house on Friday.

German states run by the Social Democrats (SPD) and Greens have vowed to veto the agreement between Berlin and Berne, saying it lets tax evaders off too easily.

"Given the meager revenues in the German states and municipalities, I find it completely unacceptable for the Bundesrat to reject the tax deal with Switzerland," Schaeuble said on Tuesday in a speech to the Bundestag lower house.

"There is no rational, comprehensible argument" against the deal, he added. "If you feel responsible for the revenues of Germany and its states, then give up your politically-motivated blockade."

Schaeuble has been the leading advocate of a deal that would require Swiss banks to levy a punitive charge of some 150 billion Euro on undeclared funds held by Germans and tax future income. The proceeds would be passed on to Germany without the identity of the account holders being revealed.

With less than a year to go until Germany holds an election, the SPD are describing the deal as an example of Chancellor Angela Merkel's soft approach on financial crimes committed by the wealthy.

They are vowing to put their rejection of the deal at the centre of an election campaign focused on "social justice". That campaign is being led by Peer Steinbrueck, a former finance minister who cracked down ruthlessly on bank secrecy, famously referring to the Swiss as Indians running scared from the cavalry.

If the deal is rejected in the Bundesrat upper house on Friday, it could still be salvaged in a mediation procedure that seeks to resolve differences between the Bundestag and Bundesrat, but the chances of that happening are slim.

Switzerland has already done similar deals with Britain and Austria, and hopes countries like Greece and Italy will follow suit. On Monday, a judicial source said the former head of UBS's French arm had been placed under investigation as part of a probe into whether the Swiss bank helped clients evade taxes.

Rubik off track Schauble: "There is no rational, comprehensible argument against the deal", ignoring the well documented loopholes.

20 Nov 2012

German Finance Minister's Last Stand On Swiss-German Tax Deal

In a last ditch attempt to salvage the tax deal concluded with Switzerland, German Finance Minister Wolfgang Schäuble reportedly plans to make the federal states a lucrative offer with which to secure their approval for the treaty in the Bundesrat, Germany’s upper house of parliament.

It is said that the government is willing to waive its share of revenues from the windfall tax due to be imposed by Switzerland on the hitherto untaxed old wealth of German citizens concealed in Swiss banks, and to accord its share of the income to the federal states.

The bilateral tax accord provides for the one-off taxation of undeclared assets held by German taxpayers in the Confederation’s banks, at withholding tax rates varying from between 21% and 41%. The provision is expected to lead to revenues of up to EUR10bn (USD12.8bn). Up until now, the government had planned to allocate 70% of this sum to the federal states, while retaining a 30% share.

Determined to ensure adoption of the accord in the Bundesrat, where the black-yellow coalition no longer has a majority, the government is reportedly also prepared if necessary to allocate the federal states its share of revenues from the 25% withholding tax (plus solidarity surcharge) to be imposed from 2013 on future capital gains received by German taxpayers from Swiss accounts. The tax is expected to yield around EUR750m annually.

With time of the essence, the government is under increasing pressure, particularly as a last glimmer of hope recently faded when Baden-Württemberg’s Prime Minister Winfried Kretschmann (Green Party) and Finance Minister Nils Schmid (Social Democrats) announced that last minute talks with Swiss representatives had failed. The ministers therefore declared that the text could simply not be signed in its current state.

Already adopted by the Bundestag, or lower house, at the end of October, the Swiss-German tax accord is due to be put to the vote in the Bundesrat on November 23.

Rubik off track

19 Nov 2012 (iii)

Greek-Swiss Italy-Switzerland Tax Deal Hits Snags

Although Prime Minister Antonis Samaras’ government has yet to check a list of 2,059 Greeks with $1.95 billion in the Geneva, Switzerland branch of HSBC for possible tax evasion, Finance Minister Yiannis Stournaras said Greece is still hoping to reach agreement to tax Greeks who put money in Swiss banks.

Stournaras said, however, that there are difficulties to be surmounted. Greece has been trying to reach a deal with Swiss authorities and banks there so that Greeks with deposits there can be taxed, but Swiss banks have refused to provide any information, adhering to their infamous secrecy.

The United Kingdom and Germany have struck deals with Swiss authorities but he said they had weak points and acknowledged that talks are going slow. In response to a question from New Democracy Member of Parliament Lefteris Avgenakis, Stournaras said the Finance Ministry is in negotiations with Swiss officials.

Chief among the problems is that the names of depositors will not be revealed and it would be up to Swiss officials, not those in Greece, to decide the penalty that each account should pay, providing further secrecy for possible tax evaders who already have largely escaped sacrifice during Greece’s economic crisis, leaving workers, pensioners and the poor to pay the price.

Stournaras also said that some legal entities, such as trusts, will be excluded from the deal, providing another loophole and incentive for punishment-proof evasion. He also said Swiss officials are not fully cooperating.

19 Nov 2012 (ii)

Greece pursuing Swiss tax deal but sees complications

Finance Minister Yannis Stournaras has told MPs Greece is looking to strike an agreement with Swiss authorities on the taxation of its citizens who have deposited money in Switzerland.

However, Stournaras added that there are some weak points in similar agreements that Switzerland has reached with the UK and Germany.

In response to a question from New Democracy MP Lefteris Avgenakis, Stournaras said the Finance Ministry is seeking to reach a deal with Switzerland that would allow it to tax the undeclared bank deposits and other assets Greeks have in the central European country.

The UK and Germany have already secured such agreements but Stournaras said these deals “are not without problems.” He pointed out that the names of the depositors cannot be made public and that it is up to Swiss authorities to calculate the penalty that each account holder should pay.

Stournaras said that some legal entities, such as trusts, are excluded from the deal. He added that there is a limit on the information provided by Swiss authorities.

19 Nov 2012

Italy-Switzerland tax deal likely by 21 December

Switzerland is "confident" of reaching an agreement with Italy on a taxation deal to be put to the respective parliaments of both countries by 21 December. Confirmation that a treaty between the two nations is in the pipeline came from Ambassador Oscar Knapp, Head of the Markets Division of the Swiss State Secretariat for International Financial Matters. "Discussions on the bi-lateral treaty are going well, and we are fairly confident of reaching a deal to put to our respective parliaments by 21 December" he stated. If the parties manage to reach an agreement by the end of the year, the treaty will then have to be ratified by the parliaments of both countries. The Italy-Switzerland treaty is similar to those already agreed between Switzerland and Germany, UK and Austria. Under these treaties, capital held in Swiss banks by German, British and Austrian nationals will be taxed and the tax transferred by Swiss tax authorities to German, British and Austrian tax authorities. As for the Italy-Switzerland treaty, Knapp explained that several issues have already been ironed out whilst others are still being discussed. This includes the option already agreed with Germany and Great Britain, whereby Switzerland would give Italy a list of countries where Italian account holders can move their money to. Talks between officials from the two countries are forging ahead and consultations are being held on a weekly basis. No announcement has been made yet of a summit between the ministers of both countries.

16 Nov 2012

The EU Commission asks for comments on its draft proposal to tackle tax havens which will be presented to the EU Council on 4th December.

15 Nov 2012 (ii)

German Swiss tax agreement nearly dead

A tax agreement negotiated between the governments of Germany and Switzerland has almost no chance of passing the upper house of parliament in Berlin next week. A final round of talks has failed.

Swiss efforts to convince Germany's states of a bilateral draft tax agreement between Bern and Berlin amounted to nothing on Thursday when the southern German state of Baden-Wüerttemberg rejected the federal government-negotiated accord lock, stock and barrel after a final round of talks with Swiss officials.

"The agreement brokered by the federal government is not acceptable to us," Baden-Wuerttemberg's coalition of Greens and Social Democrats said in a statement in Stuttgart, thus joining other states which have been against the proposed deal and making approval by the upper house of parliament next week extremely unlikely.

States run by the Greens and Social Democrats have argued the bilateral tax agreement would leave too many loopholes for German tax evaders placing their money in Swiss bank accounts.

Revealing the weak spots: The tax accord was to come into effect on January 1, 2013, and would have obliged Swiss banks to collect tax from German investors and transfer it to Germany, with the emphasis being on levying a tax of between 21 and 41 percent on illicit earnings, depending on how long the money has already been in Swiss bank accounts.

But critics of the deal have argues that the agreement does not go far enough as the names of German tax evaders would not have to be revealed by Swiss lenders. They've also maintained that with that scope of anonymity still in place, evaders could potentially remain just that by shifting their deposits to other tax havens.

Baden-Wuerttemberg's regional government also appeared resolved to overturn the draft agreement because recent investigations by a regional court in Mannheim had found that staff from the Swiss lender UBS had actively helped Germans transfer their untaxed money to Switzerland.

"It has to be clear to Swiss banks that they can't make any more money out of tax evasion in Germany," Baden-Wuerttemberg's Finance Minister Nils Schmid told reporters.

Walking Dead

15 Nov 2012
Baden-Wuerttemberg rejects tax treaty with Switzerland

English translation here.

The Baden-Wuerttemberg state government is the planned tax agreements with Switzerland not agree on the following Friday in the Bundesrat. "This is not negotiated by the federal government deal for us able to consent," said Winfried Kretschmann Prime Minister and Minister for Finance and Economic Affairs Dr. Nils Schmid. Before a last conversation with Switzerland in Stuttgart had failed.

Kretschmann is now demanding a common European approach instead of many bilateral agreements, "Since the status quo is not satisfactory for both sides and the taxation issues by urgency, we are committed to a European approach. Germany should promote at EU level for an enlarged EU Savings Directive and the automatic exchange of information. "Currently, an EU mandate for negotiations with Switzerland and other third countries under bilateral negotiations blocked. The state government wants to ensure an EU-wide tax on all capital gains, which can not be handled by simple design right. Kretschmann: "An enlarged EU Savings Directive would close the gaps, an additional bilateral agreement would be superfluous."

The now doomed agreements grant amnesty German tax evaders and black money anonymously enables tax evaders move from Switzerland to other tax havens ("abschleichen"). Evaded taxes could be recaptured on the cheap by 21%. "We're not to backers of business models that must ultimately pay the little man," said Schmid.

Ultimately see the agreement before a law enforcement by Swiss banks, the German tax authorities, however, were largely denied insights. The prosecution of tax evasion is thus more difficult. "The recent investigations by the public prosecutor in Mannheim against the Swiss bank UBS for organized abetting tax evasion in Germany are anything but confidence. Must Swiss banks be clear that with tax evasion in Germany no more money to be earned," said Secretary Dr. Nils Schmid.

Badenwuerttemberg(BW)was one of two swing states run by the opposition (SPD / Greens), that could have joined the minority German Government to approve the tax agreement in the upper house next week where the opposition SPD / Greens have a majority. However, today's official announcement that BW will also be rejecting the Rubik along with all the other SPD / Green states, this means there is no chance for Rubik to be approved in the Bundestag in the vote for 23 November 2012.

Badenwurtemberg nail

PS: Note the key reason for rejecting the Rubik is that it contains loopholes and that the revised EU savings tax will close these loopholes and therefore no need for this agreement. This is according to my testimony as tax expert witness to the German Bundestag on 26 September 2012. My papers are PDF document German language and English language.

14 Nov 2012
EU Tax Commissioner Statement Savings at ECOFIN Council

It is now 16 months since the Commission proposed this mandate to open negotiations with Switzerland and 4 other third countries on savings taxation. This is a proposal which could ultimately allow us to make great head-way in reducing the serious problem of tax evasion.

And yet, here we still are…discussing. It is very disappointing that we are still stuck at this point.

Against this background, let me make two remarks.

First, no one can understand this delay.

We are not talking of a major EU initiative here. We are talking about giving the Commission a chance to discuss ways to improve the fight against tax fraud and evasion with international partners.

Agreeing to launch negotiations does not in any way pre-empt the end result of these talks.

I have already, many times, reassured Austria and Luxembourg that they can oppose the outcome of the negotiations if they consider it to go against their interests. They should have no concerns about that.

Second, I fail to understand the arguments which are being used to oppose progress. If some Member States want to maintain bank secrecy domestically, for their own residents, that's their choice. Our discussions do not put this into question. But this argument doesn’t fly when it comes to taxing non-residents. The EU approach does not impose anything on Austrian or Luxembourger residents. It only allows the other 25 member States to ensure the fair taxation of their own residents, according their national rules. Looking for equivalence in treatment from Switzerland is our common endeavour. And Luxembourg and Austria should know that the negotiations are about ensuring a better savings system, not about targeting them.

To conclude, let me remind you that, on three separate occasions this year, EU leaders have called for "rapid" progress on this file. The European Council fully recognises its significance in the fight against tax fraud and evasion. It’s now up to you, the Finance Ministers, to deliver on this demand.

13 Nov 2012
Savings taxation vetoed again by Luxembourg

The 27 Finance Ministers proved incapable once again of working out even a partial compromise on savings taxation, on 13 November. Luxembourg and Austria still refuse to give the green light to the start of new negotiations with Switzerland.

The failure was predictable. On 12 November, speaking to the European Parliament's Committee on Economic Affairs (ECON), Taxation Commissioner Algirdas Semeta lambasted Luxembourg and Vienna in advance: "I cannot understand that anyone would make even more difficult the consolidation efforts by Greece, Ireland, Italy, Portugal and Spain and many other member states by holding up this issue," he declared. "It is just, necessary and urgent to make progress in negotiations with Switzerland and to close the loopholes of the savings taxation directive." On three occasions in 2012, added Semeta, the European Council urged Ecofin to make "rapid" progress in this context. This has become wishful thinking, the repeated expression of which is becoming "ridiculous," say some.

On 13 November, in any case, the debate was cut short after Luxembourg's Minister, Luc Frieden, stood his ground, as expected: Luxembourg will not waive its veto on granting the Commission a mandate to negotiate with Switzerland without prior amendment of Article 10 of the EU directive on savings taxation. This article concerns the "transitional period" during which Luxembourg and Austria are authorised to apply the system of withholding at the source (which protects their banking secrecy) rather than automatic information exchange between tax administrations. The two countries are supposed to shift from withholding to automatic exchange once the EU has signed agreements setting up mechanisms for information exchange on request, based on OECD standards, with five non-EU countries: Switzerland, Liechtenstein, Andorra, San Marino and Monaco.

Luxembourg is dodging bullets:

Switzerland has already made a number of concessions on information exchange on request under pressure from the G20 and has already expressed its "willingness" to start discussing the EU's requests. The Grand Duchy, which fears capital flight, is now officially demanding to be placed on the same footing as Bern.

The United Kingdom is apparently "disappointed" by this attitude, while Luxembourg is "astonished" to hear London preach to it after it sealed a bilateral (Rubik) taxation agreement with Switzerland, which harms European solidarity.

Surprising conclusions:

In this context, the Cyprus EU Presidency handed the matter back to the 27 national experts for review, without setting any deadline. So are things back to square one? In practice yes, but in theory no, because the 27 have been contradicting themselves.

On 13 November, the finance ministers adopted without debate very surprising conclusions on the communication "on concrete ways to reinforce the fight against tax fraud and tax evasion including in relation to third countries," presented by the Commission in July 2012. "The Council notes that all member states recognise the importance of taking effective steps to fight tax evasion and fraud, also in times of budgetary constraints and of economic crisis," read the conclusions, which set certain priorities for action.

Surprisingly, the first priority in the field of direct taxation concerns savings taxation: the 27 should "carry forward work and discussions on the revision of the savings directive and reach rapidly an agreement on the negotiating directive for savings agreements with third countries, as recalled by the European Council conclusions of 28 and 29 June 2012". Another case of do as a say, not as I do.?

10 Nov 2012
Italy Working Towards Swiss tax deal by year end

At the recent G20 meeting in Mexico City, the Italian Minister of the Economy Vittorio Grilli has confirmed that Italy is working towards a tax treaty with Switzerland, possibly by the end of this year.

Discussions on a treaty commenced in May this year, with a bilateral working group being established to carry forward the negotiations. It has also, so far, involved two meetings between Swiss President Eveline Widmer-Schlumpf and Italian Prime Minister Mario Monti in June and August this year, while the Swiss Federal Council has adopted a mandate setting out the essential points on which it believes the negotiations should be based.

As now also confirmed by Grilli, the parties are talking about an agreement on the regularization of assets already held in Switzerland by non-resident taxpayers and the introduction of a withholding tax on future investment income and capital gains, such as has already been concluded with Switzerland by Germany, the United Kingdom and Austria.

It has been suggested that the additional tax revenue that would be available to Italy if it were to agree such a deal, on estimated undeclared Italian funds in Switzerland of up to EUR150bn (USD192bn), could amount to some EUR40bn up-front, with other significant funds paid annually thereafter.

The discussions have also covered the necessary modifications that would need to be made to the (previously agreed but uncompleted) double taxation agreement between the two countries, particularly with regard to the exchange of tax information so that Switzerland could be taken off the Italian 'black list', together with possible changes to the existing agreement on the taxation of Italian cross-border workers.

To date, the progress of the negotiations has been slower than expected, with the working group having been originally expected to present concrete proposals by the end of this autumn. However, it now appears that contacts are being intensified, with various meetings being planned in the short-term.

At the G20 meeting, Grilli underlined that the Italian government’s objective was to have an agreement with Switzerland based on the principle of transparency and in accordance with the international standards on tax information exchange, that were again confirmed in the latest G20 communique. He said there was no reason to think that agreement could not be reached in accordance with those principles.

9 Nov 2012
The North Rhine-Westphalian Minister of Finance Norbert Walter-Borjans (SPD) believes that a tax agreement with Switzerland will promote scam

Stuttgart The North Rhine-Westphalian Minister of Finance Norbert Walter-Borjans (SPD) is working towards the failure of the tax agreement with Switzerland. Mediation he rejects strict. The SPD and the red-green finance ministers have declared the tax agreement with Switzerland to have failed. Where the contract by the Federal Council in two weeks? If no serious changes, it will be no majority in the Federal Council for the Agreement. The chance that even decisive happened to the cabinet meeting is low due to political constraints. I say unequivocally that Germany can with the condition that there is no agreement, live better than the Swiss banks and tax fraudsters. With the use of control CDs we have an effective instrument against tax evasion. Nevertheless, I say: The state is not ideal.

What needs to happen in order for the German-Swiss agreement is given a chance? Our criticism does hold of the solutions for the past, the present and the future. The biggest deficit of the past is that an amnesty for tax evaders is provided, which is also connected with a special discount. The regime makes Altvermögen honest taxpayers to fools. That we can not endorse. In the current year tax evaders with accounts in Switzerland stood still open all the doors in order to make the entry into force of the Treaty of the dust. In the future, investigations and inspections to be next to impossible. Purchases of control CDs will no longer be permitted. This is an invitation to tax evaders, go back to the future more to Switzerland. The damage to the German tax authorities would be even greater.

Why should tax evaders go with the entry into force of the Agreement to Switzerland if they pay in the future will an equally high flat tax rate as in this country? Future pay German investors in Switzerland, only the withholding tax on capital gains. For tax cheats who have black money made to the side, it is an invitation. Who future, for example, brings a million euros black money in Switzerland and it annually at the rate of three per cent capital gains tax of 30 000 euro comes off cheap. In this case, only a flat tax of 7,800 euros will be charged. The previously evaded income tax of around 450 000 euros, he retains it - at the expense of honest taxpayers.

The countries have an interest in monetary recoveries. Switzerland is guaranteed for Altvermögen a payment of two billion Swiss francs, added revenues come from the future withholding tax. Have you calculated how much money to your country dispensed with if the agreement fails? I do not think we do without money. Rather, the German exchequer receipts are missed when the agreement enters into force. It is true that there are enormous foreign assets located in Switzerland, which was, according to tax experts are not taxed at 80 percent. What we now want to get candy in the form of a minimum sum at the Altvermögen and future income tax on capital gains are more symbolic Once amounts. This is at least in comparison to the revenue from the tax discs that have inclusive of resulting self ads brought nationwide around three billion euros.

Mannheim is determined against the Swiss bank UBS, because it is said to have aided and abetted the fraud. Remove the Swiss banks that it is serious about its forthcoming White money my strategy? The burden of proof that Swiss banks change their behavior, is among those who have enriched themselves at the expense of German taxpayers. I'm suspicious because of past experiences. That a change is taking place in Switzerland, I doubt so long as provided in the Agreement, is not a tax in the future to buy more CDs. If in the future anyway, everything should run legally, the prohibition of the CD purchase is unnecessary. Now if even the suspicion of the public prosecutor against Swiss banks confirmed the promise of the Swiss banks to agree to accept only taxed money, hardly credible.

German Finance Minister Schäuble says, North Rhine-Westphalia cotton balls on the purchases of control CDs. In fact, the revenues are negligible in comparison to the Agreement. An agreement was better than chance finds the tax investigation. Error: checking in sample coverage leads to uncertainty for tax evaders and has been introduced in NRW alone more than 7100 voluntary disclosure with reference to Switzerland. Of course I would be an agreement that ensures untaxed income, rather than random investigations. I never doubted. The alternative that the federal government offers to the countries, but naive. Since the agreement granted the black money holders and their helpers large and persistent loopholes - and that too with government blessing.

Switzerland has announced that negotiations are terminated if the agreement fails. After ten years expire tax offenses. The Finance Minister says 60 percent of the money was deposited for some time over a decade in the neighboring country. Take the SPD countries accept that it come with a failure of the agreement without paying tax evaders? The impression will generate the the Finance Minister is wrong. If a new agreement is perhaps one to two years after entry into force, barred only a comparatively no part. And the targeted 60 per cent are already barred - with or without an agreement.

Schäuble has negotiated the agreement and a half years. To start new talks with Switzerland, likely take years. This means that the German tax authorities waived a lot of money. He does not determined. Because in the meantime, the taxman their hands in their laps. For me, the attitude towards the tax treaty is a tax moral and an economic issue. I will not be reduced to this, what should I take the bird in the hand, if the pigeon is waiting on the roof. I would like once a decent deal: It is better to extend the current state to one or two years, as a permanently bad contract agree.

Does not speak for Switzerland, that it recognizes the OECD standard on exchange of information? This also means that in the future with a suspected tax fraud group requests the German tax authorities in the Confederation are allowed. Both Switzerland and the federal government to prepare, because they see that they do not go through with such an unbalanced agreement. Meanwhile, also talked about the fact that the countries should get a bigger share of the tax revenue. These are the usual attempts to lure the country with money. Now, if the group requests in Switzerland are to be permitted, it is a vague statement. My trust is limited. I know that the Swiss banks want to prevent group inquiries. Group inquiry for the past, where it matters, Switzerland has rejected.

7 Nov 2012
Swiss aim for speedy deal to tax offshore Greek assets

Switzerland is ready to enter into formal negotiations with Greece over a deal to tax the assets wealthy Greeks have stashed in secret Swiss bank accounts.

The Swiss government said on Wednesday it had adopted a mandate for negotiations after consulting parliamentary committees. The two governments have been holding initial discussions on the matter for several months already.

"Bern and Athens are striving towards the swift conclusion of an agreement, similar to the agreements with Germany, Britain and Austria," the government said in a statement.

A Greek journalist made headlines last month by publishing the names of more than 2,000 of his compatriots who held Swiss bank accounts.

The "Lagarde List" - so named for Christine Lagarde, head of the International Monetary Fund - touched a nerve in near-bankrupt Greece, where rampant tax evasion is undermining a struggle to cut public spending and raise revenue.

Lagarde handed information on tax dodgers to authorities in several European Union states in 2010 when she was French finance minister.

Any agreement with Switzerland could help fill some of the gaping holes in Greece's budget by imposing a punitive levy on existing account balances and a withholding tax on future gains.

The Swiss government has sought such tax deals as an alternative to the automatic exchange of bank information, in a bid to defend the secrecy it sees as crucial to its $2 trillion offshore wealth management industry.

News of the alleged tax cheats on the "Lagarde List" enraged many who are already furious over consecutive Greek governments' failure to crack down on the rich while years of recession have wiped out a fifth of economic output and hammered middle-class living standards.

According to an EU report published last year, Greece has about 60 billion euros in unpaid taxes, an amount equal to roughly a quarter of its economy and over a sixth of its debt. But how much money Athens stands to recoup via a withholding tax deal is not clear.

Greeks held an estimated 24 billion Swiss francs in undeclared assets in Switzerland, according to a 2009 study by Helvea. That amount is likely to have risen as the economic situation in Greece has worsened. The Swiss have already signed withholding tax deals with Britain, Austria and Germany, and are in talks with Italy.

However, the fate of the German deal now rests with the Bundesrat, the upper house of the German parliament, where Chancellor Angela Merkel's government lacks a majority. The opposition Social Democrats have threatened to block the agreement, saying it is too lenient on tax evaders.

Death and taxes

3 Nov 2012
Swiss president still hopeful for German tax deal

German tax deal faces stiff opposition from SPD
The Swiss president is still hopeful that the German parliament will back a deal for Swiss banks to levy taxes on assets German citizens have stashed in secret accounts despite stiff Social Democrat (SPD) opposition.

Swiss Finance Minister Eveline Widmer-Schlumpf, who also holds the rotating position as president, said on Wednesday she still expected the deal to be passed by the end of the year in time to take effect on Jan. 1, 2013.

"There is a 50-50 chance that it is adopted," Widmer-Schlumpf told a public event held by Germany's Die Zeit newspaper in the Swiss capital, adding she had confidence in German Finance Minister Wolfgang Schaeuble to bring it through. German Chancellor Angela Merkel's government agreed the deal with Switzerland earlier this year, but it still needs approval from Germany's upper house of parliament, which represents the states and where the government lacks a majority.

The SPD's nomination of Peer Steinbrueck - a critic of Swiss banking secrecy - to challenge Merkel in the German election next year - has stiffened his party's resolve to block the deal in a vote expected next month.

But Widmer-Schlumpf noted that even if the German upper house rejects the deal, it could still be salvaged in a mediation procedure that seeks to resolve differences between the upper and lower houses. The agreement would require Swiss banks to levy a punitive charge on an estimated 150 billion euros in undeclared money held by Germans in Swiss accounts and to tax future income, with the proceeds passed on to Germany without the identities of the account holders being revealed.

Britain and Austria have already ratified similar deals which will come into force next year and Switzerland hopes other countries - including Greece and Italy - will also follow suit.

Rubik optimist

25 Oct2012 (ii)
Sound arguments by German opposition against Rubik

"This agreement must be rejected for fairness in taxation," says Joachim Poss (SPD). It brings the German taxpayer more disadvantages than advantages, "and that can be proven." This bilateral agreement is an impediment in the fight against tax havens. "The legalization of crime control we can not accept," says Poss. The talks SPDler visibly enraged, even though he is constantly interrupted by hecklers. The agreement is a slap in the face of honest tax. The U.S. would settle for the anonymity of the tax evaders are not satisfied, which will be retained in the German agreement. Germany is the main partner of Switzerland, Poss says, so he asked the Minister of Finance, Mr Schäuble said: "A better solution is really not have been possible?

When you call his own policies as alternative, was not a real one politician says Barbara Hoell of the Left. She warns the Bundestag before accepting the agreement, because he fight against tax dodgers verunmögliche so to speak - because each country would then negotiate their own bilateral agreements with Switzerland, which will prevent a solution at European level. The Swiss banks have already written to German citizens who have accounts with them, and they pointed out the possibility of recapture, "so that they get a clean bill of health for their criminal acts. Then I ask myself, where we live, "says Holl.

Gerhard Schick from Alliance 90/Greens speaks. A veil of silence over tax evasion would be given. He cites a report by KPMG in Zurich: "Without agreement, the pressure on tax evaders in Switzerland will be bigger." If it fails, the Agreement, the customer would have to reckon with greater uncertainty, have the president of the Swiss Bankers Association said also. "Yes, the tax treaty provides security - and for tax evasion. This is wrong, "said Schick. He also criticized the bilateral solutions in tax dispute: It will thus harder for Europe to promote the automatic exchange of information. "The bilateral approach is misleading."

Trittin (B90/Grüne) does Schaeuble head on: He had once said that the era of banking secrecy is over - "what you submit as a deal is nothing more than to save this era in the future." He answered the enforcement of German tax laws banks such as UBS and Credit Suisse, "which have been in various methods of tax evasion not only accused, but also transferred."

As the last representative of the tax treaty opponents Martin Gerster of the SPD steps up to the lectern. It was no use, that Wolfgang Schaeuble again on revenue notes that Germany could generate thanks to the income. Because the control CDs would result in revenue of over 4 billion euros, while the Swiss banks to the German tax authorities with the agreement guaranteed a 2 billion euro.

26 Oct 2012
Merkel’s Swiss Tax Pact Faces Veto as SPD Flexes Pre-Vote Power

German lower-house lawmakers backed a tax treaty with Switzerland that the opposition says it will veto, illustrating Chancellor Angela Merkel’s crimped power to set the national agenda even as she leads in polls before next year’s national elections. The proposed accord against tax evasion, backed by Merkel and Finance Minister Wolfgang Schaeuble, is fueling a proxy conflict between the Social Democrat-led opposition and Merkel’s coalition parties, which lost their upper-house majority through a succession of state election defeats since 2010. The draft cannot become law until it wins approval in the upper house, where the opposition is refusing to pass it without changes. “This treaty must take effect on Jan. 1, 2013, or it will fail,” Schaeuble told lawmakers in a speech to the lower house, the Bundestag, in Berlin today. “You won’t get another one in the foreseeable future.” The opposition is rejecting the pact “for reasons of party tactics,” he said.

While Merkel is Germany’s most popular politician and her Christian Democratic Union leads the SPD in all polls, the CDU has lost ground in cities and regions as voters vented anger at euro-area bailouts, incumbents retired and support collapsed for her Free Democratic allies.

Last weekend, Merkel’s party lost the mayor’s office in Daimler AG (DAI)’s home town of Stuttgart it had held since 1974. Merkel campaigns tomorrow in Karlsruhe, the southwestern city where polls suggest the CDU will lose the mayoral race to a candidate backed by the Social Democrats and the Greens. Green Rise

Karlsruhe is near the Swiss border in Baden-Wuerttemberg, a state that luxury carmakers Daimler and Porsche SE (PAH3) call home. Merkel’s party lost 2011 elections there after 58 years of uninterrupted rule, making Winfried Kretschmann Germany’s first Green state premier. Former Greens national leader Fritz Kuhn won the mayoral race on Oct. 21 in Stuttgart, the state capital.

The German-Swiss tax treaty has spurred conflict between Merkel and her political foes as elections due by the fall of 2013 move closer. State election losses by Merkel’s Christian Democrats since 2010 have left the two main opposition parties, the SPD and Greens, in control of the upper house of parliament.

The deal with Switzerland legalizes tax evasion and “is an obstacle in the fight against tax havens,” Social Democratic lawmaker Joachim Poss told the Bundestag. He said his SPD and the Greens will likely reject the treaty in the upper house, the Bundesrat, where Germany’s states are represented. The chamber will probably vote on the tax treaty on Nov. 23. Latest Poll

Merkel’s Christian Democratic bloc is ahead nationally with 38 percent support and would need to replace the Free Democrats as coalition partner to have a parliamentary majority, according to a weekly Forsa poll on Oct. 24. The Social Democrats polled 27 percent and the Greens 12 percent. The poll of 2,500 people has a margin of error of as many as 2.5 percentage points.

Those scores, if replicated at the federal election due in September next year, would give neither of the two main blocs enough seats to form a government, leaving a “grand coalition” between Merkel’s party and the SPD as the most likely scenario.

Wrangling over the treaty has centered on provisions for taxing assets previously hidden by Germans in Swiss bank accounts, which the opposition says are too lenient because it would keep client identities secret. Signed by both governments in September 2011, the treaty was changed in April as Schaeuble sought to address opposition demands.

The pact would let Germany reap about 10 billion euros ($13 billion) in retroactive taxes alone, CDU lawmakers Klaus-Peter Flosbach and Olav Gutting said in an Oct. 17 statement, citing a Finance Ministry estimate.

Failure to ratify the treaty in Germany would be a “very bad precedent” and a missed opportunity, Merkel said on Sept. 17. Buying CDs with stolen bank data on German tax cheats, as German state officials have done, “can’t be a solution.”

25 Oct2012
Schaeuble Strives To Save Swiss tax deal.

Struggling to prevent the legislation from being vetoed in the German Bundesrat, or upper house of parliament, German Finance Minister Wolfgang Schaeuble has once again defended the bilateral tax deal brokered with Switzerland, which aims to ensure tax justice for both the past and the future.

In a recent Internet podcast, Schaeuble underscored that “a functioning tax agreement” must ensure that the income of every taxpayer in Germany is treated in exactly the same way, irrespective of the country in which that income is realized.

Schaeuble insisted that no one should be able to reduce or evade their tax obligations by either manipulating income or concealing assets in another state. The agreement with Switzerland serves to achieve this objective, the minister maintained.

The tax accord negotiated with Switzerland provides for a lump sum tax to be imposed anonymously on hitherto undeclared German assets located in Swiss banks at tax rates of between 21% and 41%. Future capital gains are to be taxed as in Germany under the treaty.

Beat horse

Germany’s Social Democrats (SPD) and Green Party have opposed the treaty from the outset, arguing that the provisions are too lenient. SPD-led states are determined to maintain pressure on tax evaders and intend to purchase tax data discs in future, containing information on German residents with untaxed assets held in Swiss banks.

Concluding, Schaeuble warned that the purchase of tax discs is no alternative to a reasonable statutory provision, pointing out that the purchase of illegally obtained information is merely a second best solution. The state must ensure that its laws are implemented without recourse to collaboration with criminals, the minister concluded, noting that this is only possible via the agreement given that Swiss banking secrecy has up to now protected tax fugitives.

24 Oct 2012
Italy Looks For Pre-Election Tax Pact With Switzerland

Minister of the Economy Vittorio Grilli has disclosed that the Italian government is aiming to reach agreement on the proposed new tax treaty with Switzerland before the next Italian general elections, which are due in the spring of next year.

Discussions on an agreement commenced in May this year, with a bilateral working group being established to carry forward the negotiations. It has also, so far, involved two meetings between Swiss President Eveline Widmer-Schlumpf and Italian Prime Minister Mario Monti in June and August this year, while the Swiss Federal Council has adopted a mandate setting out the essential points on which it believes the negotiations should be based.

The parties have talked, in particular, around a model for an agreement on the regularization of assets held in Switzerland by non-resident taxpayers and the introduction of a withholding tax on future investment income, such as has already been concluded with Switzerland by Germany, the United Kingdom and Austria.

The discussions have also covered the necessary modifications that would need to be made to the (previously agreed but uncompleted) double taxation agreement between the two countries, particularly with regard to the exchange of tax information, so that Switzerland could be taken off the Italian 'black list', together with possible changes to the existing agreement on the taxation of Italian cross-border workers.

However, the progress of the negotiations has been slower than expected, with the working group having been originally expected to present concrete proposals by the end of this autumn.

Grilli has now confirmed that work is still continuing on the agreement, with further technical meetings this month. While he underlined that the sooner the treaty could be concluded the better it would be, he also stressed that the Italian government’s objective was to have an agreement with Switzerland based on principles that it considered to be "suitable".

21 Oct2012
UK tax professor mocks Rubik's loopholes.

Describes loopholes at 14:00.

Loophole ride
13 Oct 2012 Government of Jersey : EU Retention tax payments for 2011 GBP 4.6 million

Jersey's Acting Comptroller of Taxes, David Le Cuirot, has sent to EU Member States a total of £4.6 million in retention tax for the year 2011.

Retention tax is applied by Jersey paying agents and passed to the Comptroller of Taxes in accordance with agreements entered into with each of the 27 EU Member States on the taxation of eligible savings income that individuals resident in the Member States are receiving from the Island.

Under the terms of the agreements, 75% of the tax retained (£4.6 million) is sent to the individual Member States and the remaining 25% (£1.5 million) is retained by the Treasury.

The amount of tax retained in 2011 is 15% higher than in 2010 when £4 million was sent to the Member States and £1.3 million was retained by the Treasury. The increase reflects the fact that for the second half of 2011 a higher rate of retention tax applied.

The collection of retention tax relies on the co-operation of local paying agents, and the Acting Comptroller of Taxes is happy that the process of exchanging information and the payment of retention tax is continuing to work extremely well.

David Le Cuirot said "I am extremely grateful once again for all the cooperation and help received from the paying agents, in particular the banks, who bear the greatest burden."

The Treasury and Resources Minister, Senator Philip Ozouf, said "As part of our good neighbour policy we are pleased to continue voluntarily to lend support to the Member States in the implementation of their Tax on Savings Income Directive."

This payment works out to be less than 0.001% of non-resident assets, proving why the EU savings tax directive needs to be amended to include trusts, foundations and non-UCITS.

Generous Jersey

5 Oct2012
Swiss referendum
2 Oct 2012 (ii) Remnants of Swiss banking secrecy under fire as German opposition leader blasts tax deal

BERLIN — Switzerland’s efforts to safeguard what remains of its banking secrecy came under fire Monday from the man who hopes to unseat Chancellor Angela Merkel in next year’s German elections.

Peer Steinbrueck has long been critical of a proposed treaty that would see Germany receive billions of euros from Switzerland in return for dropping a demand to get the names of suspected tax cheats.

The views of Germany’s former finance minister received new weight coming hours after he received the nomination to lead the opposition Social Democrats into the next elections.

“This German-Swiss tax agreement contains so many fundamental flaws that I can’t recommend to my party (...) to vote in favor of it,” said Steinbrueck.

The agreement was meant to be approved this year, so it could come into force in 2013. But Steinbrueck’s center-left party can block it in Germany’s upper house, where Merkel’s coalition lacks a majority.

By making the tax deal a campaign issue, Steinbrueck also puts pressure on Merkel to show she won’t go soft on tax cheats — at least until the election, which is expected to take place in September.

The deal with Germany is part of a series of agreements Switzerland has negotiated with dozens of countries in an attempt to shed its image as an uncooperative tax haven. But only the treaty with the United States — which also has yet to be confirmed by Washington— requires Switzerland to hand the names of suspected tax cheats to foreign authorities.

“The majority of honest taxpayers...shouldn’t get the impression that they are the dumb ones,” Steinbrueck told reporters in Berlin.

His comments echoed those of Thomas Eigenthaler, head of the German tax inspectors’ union, who told Parliament last week that the Swiss deal amounted to “a red carpet for hardcore tax evaders” because it allows them to avoid possible prison sentences.

The sums involved are sizeable. Under the deal, Switzerland would levy a onetime punitive tax of 21 to 41 percent on undeclared German assets in Switzerland, leading Germany’s Finance Ministry to predict a payout of at least €10 billion. On top of that would come millions from an anonymous capital gains tax.

But campaign groups say this would only be a fraction of the German money hidden in Switzerland.

Markus Meinzer, a researcher at the nonprofit Tax Justice Network, said between €250 billion and €400 billion untaxed German assets in Switzerland were a reasonable estimate (which was presented by Mark Morris at Bundestag hearing).

2 Oct2012
Buck stops here
1 oct 2012 Semeta: Austria's blockade is costing us billions

English translation here.

Interview. Vienna's adherence to the outmoded banking secrecy harms all EU countries.

The Austrian blockade of a tax treaty with Switzerland would cost billions. This is just as unacceptable as the banking secrecy, says the Tax Commissioner.

Economics Journal: You are a critic of the Austrian banking secrecy. Why should Austria abandon it?

Algirdas Semeta: Austria has agreed to the Savings Directive 2003 itself. In this transition period for Austria and Luxembourg, and unique conditions for changing the automatic exchange of information have been established. These conditions are met in practice: all neighboring countries exchange information about the account holders on request. The Directive also provides that the fulfillment of the conditions must be confirmed by the EU member states unanimously. This allowed Austria and Luxembourg to capture the transition regime.

Austria uses a loophole in the EU directive?

This is not a loophole, it was decided in 2003 Sun But Austria and Luxembourg to take this opportunity to block negotiations with Switzerland and Liechtenstein on the application of an extended Savings Directive. They do not criticize about negotiation outcomes, but also prevent advance negotiations. Once the Commission has produced results that do not meet the needs of the Austrians, we could be talking about how we can improve the situation. But for months now that we did not even get a negotiating mandate is frustrating.

The Government wants a level playing field in the financial sector such as Switzerland.

Austria is in a completely different situation to that of Switzerland, which is obviously not an EU member. Be treated the same as Switzerland want to be, so maybe not the right argument.

What does it cost to EU countries that it considers the agreement with Switzerland is?

When I look at the loopholes for tax evasion, we want to close, it's probably billions of Euro which avoid the EU tax authorities. Especially in times of much-needed fiscal consolidation EU could well need.

Austria argued not that banking secrecy encourages tax evasion, but the lack of transparency in company law in the UK, Malta and Cyprus, which protects the beneficiaries of capital flows. Would you also do it?

We have the Code of Conduct on Business Taxation. Since its introduction in 1997, more than 500 cases have been investigated in different Member States and identified more than 100 corporate taxation models as dangerous and abandoned by the government. If we, the Austrian authorities report specific examples in an EU country, the Code of Conduct Working Group will take care of it.

The U.S. state of Delaware, is often referred to as a tax haven. Make the other hand pressure in Washington?

The position of the U.S. in the fight against tax fraud, has changed dramatically. According to the Foreign Account Tax Compliance Act (FATCA) must be U.S. citizens abroad register their account balances to the U.S. tax authorities and pay tax in the U.S.. Who are ready to implement the FATCA reciprocal information.

The U.S. is doing now pressure on banking secrecy?

The greatest players in the world are moving towards automatic exchange of information. Was the concept of banking secrecy is long enough. It is outdated and must be replaced as soon as possible.

Finance Minister Fekter however, leads to protect the Austrian savers into the meeting.

I have to be very clear: The move to automatic exchange of information relates only to persons who are not established in Austria - for example German, who have accounts in Austria. (Of which raises the tax office, a withholding tax of 35 per cent in favor of the countries of origin, Note) The internal regime for Austrians can keep the government or make, as she wants.
30 Sep 2012 Bern hoping for horse trading in Berlin over Switzerland-Germany agreement.

English translation here.

Despite the awkward starting position the Federal Administration in Bern and the governing coalition of CDU and FDP in Berlin hope that the tax agreement will have a break through. A "reliable" source, says there is mediation committee of the Bundestag and Bundesrat. This is made up of 16 members of both chambers of parliament to iron out differences. It should work out a compromise that could be agreed then the two chambers. The Conciliation Committee in Switzerland meets the conciliation conference of National Council.

Switzerland and the ruling coalition of the CDU and FDP is seeking a deal. This is confirmed by a person familiar with the dossier Source: The mediation committee would be a package deal with other policies. They could, for example, link the tax treaty with the promotion of energy-saving building renovations, which is currently blocked in the German Bundesrat because of the expected additional cost.

In such a deal also suggest the German financial statements of State and CDU member of the Bundestag Steffen Kampeter. In early September, he said in an interview: "The most important step to improve the revenue in the German states, (...), support for the German-Swiss tax treaty." We would then have enough money for the energy efficiency of buildings there. Federal and state governments have the agreement in the coming years, "catch many tax cheats" with tens of billions more in the coffers.

Kampeter still pointed to a further blocked template: "We hope that the States put the interests of people in their states forward." Also, this business could play a role to resolve the dispute over the tax treaties . In any case, the CDU finance expert expects "a majority in the Bundesrat, if the inspection enforces that national interests are more important than mere party tactics.

Such consistent, outdated and unwarranted optimism by the German CDU about the possibility to horse trade the agreement into ratification spurns me to repost some older cartoons:-

Bet on Rubik

Flogging dead horse

Swiss stampede
26 Sep 2012
Swiss Run
25 Sep 2012 Passions flare up over Switzerland-Germany agreement.

Backers and adversaries of the Rubik bilateral taxation agreement that Germany has signed with Switzerland maintained their irreconcilable positions, on 24 September in Berlin.

The Finance Committee of the Bundestag, the German parliament's lower chamber, held a public hearing on this sensitive issue as important parliamentary votes loom in November (see Europolitics 4492). A total of 23 experts in different areas (Swiss state secretary, bankers, university professors, tax consultants, tax administration officials, NGO representatives, etc) participated.

The Rubik agreement, which provides for the anonymous regularisation of assets stashed by residents of Germany in Switzerland, and the levy of a withholding tax at the source on income that continues to be earned on these assets in the future, is generally viewed positively by the banking community.

For the German Bankers' Association, it offers "the opportunity to achieve its objectives": to replenish the state budget without encountering much opposition. The German government expects to recover €1.62 billion in 2013. "Never has Germany had the opportunity to rely on aid from another state to enforce its tax claims," said tax lawyer Jochen Lüdicke (Freshfields Bruckhaus Deringer).

Reactions in academia are much more mixed. Professor Lorenz Jarass (Hochschule RheinMain Wiesbaden) commented that if the German parliament ratifies the agreement, it will be giving fraudsters "a blank cheque" because Rubik will preserve Swiss banking secrecy. According to Zurich-based international tax expert Mark Morris, this is all the more true because Rubik is like Emmenthal cheese: full of holes. Trusts and foundations, among other entities, will remain very attractive vehicles for those who wish to evade taxes. Swiss State Secretary for International Financial Issues Michael Ambuehl naturally disputed this claim, saying the agreement is "broad" in scope.

50-percent duped

For Itai Grinberg, professor at Georgetown University in the United States and former adviser in the Obama administration, that is nevertheless not the most serious consideration. The adoption of automatic information exchange between administrations on the widest scale possible is the only way to fight tax evasion effectively, he argued.

If it endorses Rubik, Berlin may well "nip in the bud the emergence of a multilateral system" based on this principle, which it nevertheless advocates in other bodies (EU, OECD, agreement with the United States on FATCA). The question is how to convince Luxembourg, Austria, Singapore and Hong Kong to abolish banking secrecy if Switzerland is not obliged to do so. Predictably, this view was echoed by Markus Meinzer of Tax Justice Network.

21 Sep 2012 German Agreement with Switzerland: Uncle Sam's lesson to Berlin

Proponents and opponents of banking secrecy will be locking horns on the afternoon of 24 September in Berlin, at a public hearing sponsored by the Finance Committee of the Bundestag (German parliament's lower house) on the Rubik bilateral taxation agreement signed by Germany and Switzerland in 2011. The agreement is criticised by the United States.

The Rubik deal has to be ratified by both houses of the German parliament – voting is set for 23 November, two days ahead of a possible Swiss referendum – to enter into force, at the beginning of 2013, hopes Bern. This will be less of a problem in the Bundestag, where the German chancellor and her allies have a majority, than in the Bundesrat (which represents the Länder), where they are in the minority.

Switzerland plans to play it safe, though. It will be sending some important people to Berlin, on 24 September: its State Secretary for International Financial Matters, Michael Ambühl, and the President of the Swiss Bankers' Association, Patrick Odier, among others. They will be facing determined opponents to Rubik, including US law professor Itai Grinberg and Zurich-based tax consultant Mark Morris. Twenty-three people will testify at the hearing.

Grinberg, one of the drafters of the Foreign Account Tax Compliance Act (FATCA) and a former taxation adviser in the Obama administration, will warn German MPs against the temptation of endorsing the Rubik agreement.

According to the text forwarded to German MPs, use of a system of automatic information exchange, on the largest scale possible, is the only way to effectively fight tax evasion, if only for reasons of fairness. Such a system also helps identify all funds hidden by fraudsters abroad.

Germany seems to have understood the message, since it has concluded precisely on this basis a "model intergovernmental agreement" with the United States on the application of FATCA, which will impose a transparency obligation on financial institutions, on pain of penalties. The United Kingdom, France, Italy and Spain have done the same.

Berlin committed in this context to promote the model of automatic information exchange in the international arena. So it would lose credibility by ratifying the agreement with Switzerland, which preserves Swiss banking secrecy. According to Grinberg, the confederation itself made serious concessions to the United States in June 2012. Germany could have made an effort to obtain the same concessions, argues the professor.

Meanwhile, Berlin risks "nipping in the bud the emergence of a multilateral automatic information exchange system". Not only Washington, but also most EU and even OECD states are now advocating for such a system. How can Luxembourg, Austria, Singapore or Hong Kong be convinced to abolish their banking secrecy if Switzerland is not placed under the same obligation? Germany would therefore shoot itself in the foot by ratifying Rubik, says Grinberg, since it would "diminish its ability to address its own tax evasion concerns" with other jurisdictions.

Morris, an international taxation expert, stresses the flaws inherent to Rubik. They concern first and foremost the provisions on the "effective beneficiary" of earnings on assets, which will only be partially addressed by the planned extension of the scope of EU regulations on savings taxation, limited to interest, to other sources of income. Foundations and trusts, among others, will remain a very attractive vehicle for those who wish to escape the reach of the German tax administration.

Morris estimates at €250 billion the amount of undeclared funds accumulated by German residents in Switzerland. In his view, Germany will not be able to recover more than €9 billion with Rubik, whereas it could see €120-130 billion pour into its coffers if it managed to convince Switzerland to abolish its banking secrecy.
Swiss FATCA negotiations


The Rubik agreement between Berlin and Bern, signed in August 2011 and amended in April 2012 due to certain objections raised by the European Commission, focuses on two areas: the anonymous regularisation of untaxed assets stashed by German residents in Swiss banks, and, for the future, the withholding of a tax at the source in full discharge of all tax liability on income earned on assets held in Switzerland. The Swiss have signed similar agreements with the United Kingdom and Austria and are holding negotiations with Greece. Preliminary discussions are under way with Italy, while Belgium's officials have been approached on the subject but are undecided.

A "single payment" in full discharge would regularise hidden assets: a tax of between 21% and 41% will be levied on all hidden assets.

In the future, Swiss banks will annually levy a withholding tax at the source on income paid on assets held by German residents in Switzerland. The proceeds will be turned over to the German tax administration. The rate of this taxation will vary depending on the financial products: 35% on interest on savings (as defined by existing and future EU legislation) and 26.375%

The agreement will preserve Swiss banking secrecy. Switzerland nevertheless had to make several concessions in this context: the payment in advance, in 2013, of €1.8 billion as a sign of its good faith, the possibility for German authorities to make sporadic checks, flexible application of OECD standards on information exchange on request, etc.

In return, Germany agreed to facilitate access for Swiss financial institutions to its market, to decriminalise Swiss banks, their employees and clients, and to no longer exploit stolen data on the clients of Swiss financial institutions. Germany would shoot itself in the foot by ratifying Rubik, says Grinberg.
18 Sep 2012 Mark Morris: Tax Expert Witness to appear before finance committee of German Parliament regarding Rubik

The German Bundestag is to hold an official hearing on 24th September 2012 on the pros and cons of the tax agreement.

My paper along with all the other expert testimonies is on the bundestag website.

17 Sep 2012 Tackling tax evasion: Commission drives point home

Tackling tax fraud and harmful competition is increasingly important to help resolve the economic crisis that continues to plague the Union, according to Taxation Commissioner Algirdas Semeta. He reiterated that the Commission would strive to "ensure progress" on the issue of savings taxation. By year's end it will present proposals "for concrete actions" to bring tax havens into line.

Semeta welcomed the comments made by Commission President José Manuel Barroso in his 'State of the Union' address to the European Parliament, on 12 September.

"Stopping tax fraud and tax evasion could put extra billions into the public purse across Europe," said Barroso. "This is why the Commission will fight for an agreement on the revised Savings Tax Directive, and on mandates to negotiate stronger savings tax agreements with third countries," namely Switzerland, Liechtenstein, Andorra, San Marino and Monaco.

"If we succeeded in working out a good agreement with the Swiss, member states could collect taxes much more effectively and solve certain budget consolidation problems," observed Semeta.

The savings taxation issue is still being held up by Luxembourg and Austria, which refuse to abolish their banking secrecy if Switzerland is not obliged to do the same – an option Bern rejects.

The commissioner urged the European Parliament to up the pressure on Luxembourg and Vienna: "Parliament supports the proposals we have made. It can also make the effort needed to convince the two countries" to make concessions.

15 Sep 2012 (ii) Ex-Chancellor Schroeder: No chance for tax treaty.

English translation:

The proposed tax agreement between Switzerland and Germany is the German ex-Chancellor Gerhard Schröder not go far enough. He lies with his party SPD in line. In that context, the agreement in Berlin are also rejected, he said.

Schroeder believes that the agreement in its current form has no chance of being accepted by the German Bundesrat (Federal Council), and early next year to apply.

Difference between U.S. and the rest of the world

The agreement will go before the German parliamentary elections in the autumn of next year can not achieve a positive vote of the states. Then one must sit together and perhaps renegotiate". The Swiss certainly would negotiate better than Germany, he continues.

In his view, it was not clear why Germany get the names of bank customers should not, move somewhere before the entry into force of the Agreement, their funds. "Why Switzerland distinguishes between the U.S. and the rest?" Asks Schroeder. Perhaps it was simply the greater power of the U.S., he predicts.

Banks do not need dirty money

That Switzerland is not in the bank's strategy secret encounters changes, the German former head of government with incomprehension. The Swiss banks are efficient enough to make even clean money good business. Even in Switzerland, thrust, "the old business model with tax evasion" no longer on all consent.

He did not understand, Schroeder added, why Switzerland is authorizing that other tax havens to hide itself behind her. The Switzerland protects the wrong thing here, they would have used a different strategy to win more than you lose. The ex-chancellor gives his SPD colleagues and former Finance Minister Peer Steinbrueck later law, but distances itself from its style. In March 2009, the North German Switzerland had compared with Indians, whom he threatened with the cavalry, they should continue to protect tax evaders.

Wealthy people participate in government tasks

And Schroeder makes clear: "If wealthy people in Germany benefit from excellent infrastructure, good schools and relatively high degree of certainty think, not to contribute their taxes to have, at least not in its entirety - it's not ok. And if other countries helping German citizens make is not "alright, he says, alluding to the Switzerland.

The tax treaty between Switzerland and Germany was a year ago in Berlin already been signed by Finance Minister Eveline Widmer-Schlumpf and her German counterpart Wolfgang Schäuble and adopted in June this year by the National Council and. The decision of the German Bundestag in Berlin is still pending.

Rubik dead
15 Sep 2012 SPD refuses to consent Tax Deal with because Switzerland excludes retroactive requests

English translation:

Berlin - The planned German-Swiss tax treaty is finally on the brink of failure. The Economic Commission of the Swiss National Council announced on Monday evening against permitting retroactive group requests. Thus block by the federal parliamentary committee prevents any way to determine the names of German citizens, who have moved Swiss black money in recent months to other states. Just that the SPD had but - apart from a number of other issues - a precondition for signing it.

"The decision of the Economic Commission, the SPD ruled States is no longer possible to agree on the Federal agreement" said the Finance Minister Jens Saxony-Anhalt Bullerjahn. Also from SPD states rumors circle that the contract was finally 'stone dead'. If Switzerland agreed to backdated group requests to 1 September 2011 nor at least for the 1 July admit 2012, the SPD would consider the need for negotiations. But now it was 'Unthinkable to endorse the treaty yet'. This applies even more given information according to which the so-called 'Abschleichen' German Tax evaders from Switzerland to other countries during the summer months has increased substantially.

For group inquiries are a kind of dragnet in which potential suspects are reviewed based on specific criteria. Even Finance Minister Eveline Widmer-Schlumpf agreed with the decision of the Committee.

Her colleague Wolfgang Schaeuble (CDU), said that no one should require a constitutional democracy like Switzerland, to retroactively change laws. In Germany it was the inadmissible for good reasons. Instead of making unrealistic demands, the agreement the SPD should prefer to agree as tax evaders could still move their money to third countries. To purchase CDs with tax information about German citizens with Swiss bank account called Schaeuble 'highly controversial'. In the long run it would be unacceptable if a country like Germany with 'more or less criminal figures' work with. This is a perversion of the rule of law'.

Fool me

Rubik clear
14 Sep 2012 (ii) Switzerland sows discord in Belgium with Rubik .

Between the promise of netting significant revenues without encountering any opposition and the need to maintain a certain degree of cohesion at EU level on fighting tax evasion, what is the best choice? This is the touchy question facing Belgium, being courted in turn by Switzerland to seal a ‘Rubik agreement’.

After a visit to Switzerland, on 4 September, Belgian Foreign Minister Didier Reynders (a French-speaking Liberal) recommended that the Belgian parliament consider the option of the country signing a bilateral agreement with Berne on the taxation of assets that Belgian residents have hidden from the tax administration in the past and/or prefer not to declare in the future.

Germany, the United Kingdom and Austria have already signed similar agreements with Berne. Berlin’s accord is nevertheless in danger of being scuttled by the Social Democrat opposition, which has the majority in the Bundestag, in a vote set for November. Greece and Italy are presently holding talks with the Swiss. France - under Sarkozy - rejected this option.

Under a ‘Rubik agreement’, Swiss financial institutions withhold at the source a flat rate of taxation, in discharge of all tax liability and on an anonymous basis, on all assets hidden by account holders in the past. The amount withheld is paid to the taxpayer’s state of residence, along with an anticipatory tax on the future earnings of other assets.

In return, Berne demands that the EU states that sign up agree to preserve Swiss banking secrecy (no identities will be disclosed, apart from those that may be transmitted in the framework of more flexible exchanges of information on demand) and to renounce efforts to acquire stolen bank data.

According to information allegedly relayed by the Swiss central bank but immediately denied by Swiss authorities, Belgium could easily net €10 billion, a boon in this period of economic crisis.

Reynders therefore came out clearly in favour of the Belgian parliament organising a hearing of Swiss experts on Rubik. He nevertheless took precautions. A certain form of tax amnesty would be possible for the past, he said, but the Rubik solution could only be considered for the future on a transitional basis, given the Union’s objective of making the use of automatic information exchange between administrations the general rule at EU level.

The foreign minister’s statements have sown discord in Belgium’s coalition government. The current Finance Minister, Flemish Christian Democrat Steven Vanackere, noted that negotiations with Switzerland were not on the agenda and the State Secretary in charge of combating tax evasion, Flemish Socialist John Crombez, announced that he would step down from the government if Belgium sealed a Rubik deal with Switzerland.

14 Sep 2012 Swiss Rule Out Concessions on Tax Deal with Germany

Switzerland won't make any further concessions in its attempts to reach an agreement on the taxing of German assets held in Swiss bank accounts, the government said Tuesday.

The Swiss parliament has already approved a tax deal with its northern neighbor, but political opposition to the deal in Germany could torpedo the agreement, which still has to be passed by the German Upper House of Parliament in the fall if it is to take effect early next year.

A Swiss parliamentary group late Monday decided it won't allow Germany to make any retroactive group requests for information on German clients who may have moved assets out of Swiss banks in recent months to avoid the proposed withholding tax on funds still stashed in Swiss accounts, once the deal comes into effect.

Such group requests will probably only be permitted on account information from January onwards, when the tax agreement is expected to become law, the group said.

The governments of the two countries are trying to end a long-running tax dispute over funds--estimated at around $222 billion--held in secret Swiss bank accounts, with their finance ministers agreeing earlier this year to a deal which would tax assets at between 21% and 41% in return for ongoing anonymity.

So much for the carrot to convince Germany to approve the tax accord. The Swiss are now aware the Rubik with Germany is dead.

A lost cause

Flogging dead horse
13 Sep 2012 (ii) Under pressure, Luxembourg and Vienna continue to block progress.

Luxembourg and Austria “have not budged one iota” on the savings taxation issue, on which they continue to block progress, commented different diplomats after a high-level meeting of the Council’s working group on taxation, on 11 September.

Luxembourg and Vienna dampened the Cyprus EU Presidency’s hopes of working out a compromise, at the 13 November meeting of the 27 finance ministers, on re-opening talks on savings taxation with Switzerland, Liechtenstein, Andorra, San Marino and Monaco. Nicosia will nevertheless continue to “try to find solutions,” even if the matter has to be taken “higher,” ie to the European Council, which in June 2012 called for early agreement on this matter.

The Cyprus Presidency obtained the support of European Commission President José Manuel Barroso and the head of the S&D group in the European Parliament, Austrian national Hannes Swoboda, on 12 September.

“Putting an end to tax fraud and evasion would enable us to inject billions more euro into public finances,” declared Barroso during the debate on the state of the Union, in Strasbourg. “That is why the Commission will fight to obtain an agreement on revision of the Savings Taxation Directive and on the mandates to conclude more solid agreements with third countries.”

On the same wavelength, Swoboda urged Luxembourg and Austria to make concessions. “If we succeed in reducing tax evasion by only one fourth, we can make the growth-enhancing investments Europe needs. For that to happen, we need an agreement with Switzerland,” he said.

Luxembourg and Vienna are not opposed to such an agreement in principle, but on 11 September they repeated their demand to be placed on an equal footing with Switzerland in the light of certain “international developments” – the ‘Rubik agreements’ Berne has signed with the United Kingdom and Germany in particular.

The two states refuse to be forced to abolish their banking secrecy if Switzerland does not have to follow suit. At best, the Cyprus Presidency seems to hope to work out a compromise with Switzerland on flexible application of the new OECD standards on information exchange upon request on groups of taxpayers.

In this context, Luxembourg and Austria seek an amendment of Article 10 of the Savings Taxation Directive related to the transitional period that enables them to apply withholding at the source rather than the automatic exchange of information implemented by the other 25 EU member states. This transitional period is supposed to end once the EU has sealed agreements with certain third countries, Switzerland among them, on information exchange on request.

13 Sep 2012 EU Commission toughens it's carrot and stick approach.

Šemeta: Europe could 'name and shame' tax havens: European tax havens could face sanctions including blacklisting when the European Commission issues clampdown measures later this year, Taxation Commissioner Algirdas Šemeta has told EurActiv in an interview.

An initiative to fight tax havens and aggressive tax planning will be published before the end of the year as part of a broader action plan to deal with tax evasion, Šemeta said. The commissioner published a communication on tax fraud and evasion before the summer, and has already presented a proposal for a quick-reaction mechanism to fight against VAT fraud in connection with the policy.

The action plan will put more flesh on the bones of the proposal, he said.

Stick and carrot approach

On tax havens – including those isles offshore the UK such as the Channel Islands – he advocated a ‘stick and carrot’ approach.

"It is not a secret that a lot of tax evasion is taking place within our member states, and they have to simplify their tax collection systems to try to offer incentives to pay taxes," Šemeta said.

Referring to the proposals under discussion, he said: “The application of withholding taxes for payments to such countries, and blacklisting such countries could be strong tools in terms of sticks. Whilst in terms of carrots, of course we could include better conditions of entry to EU markets.”

The Lithuanian commissioner also panned Luxembourg and Austria for continuing to resist reform of the EU Savings Directive designed to enable cooperation on the identity of bank deposit holders. "We continue to work on pushing member states to give a mandate to the Commission to negotiate with Switzerland, Liechtenstein and the three micro-states for agreements on savings taxation on the issue of exchange of information," he said.

Carrot Stick

"Unfortunately we are still not there, because of the blockage of the two member states concerned – Luxembourg and Austria. I am currently working very hard with the Cyprus presidency to convince those member states to improve the situation on tax collection from savings,” Šemeta said.

Fiscal union will have a tax impact

He added that the problems of capital flight and tax evasion in Greece highlighted the need to more cooperation on the issue, saying: “Taking into account the situation that we have in Greece I think it is untenable that those two member states continue to block progress on the files.”

A former economist, Šemeta said that the crisis and forthcoming initiatives on banking and fiscal union would have clear tax repercussions for the EU. “Fiscal policy is closely linked to tax policy,” Šemeta said, though he added that his did not mean the introduction of common taxes.

Rather, there is a need to exchange information, to co-ordinate policies in order to avoid mismatches and loopholes that could be used by tax evaders, or to make sort of competitive disadvantages to other member states. “That co-ordination will, I believe, continue to strengthen,” he said.

Next steps: By 31 Dec. 2012: Commission will present its action plan on fighting fraud and evasion together with its initiative on tax havens.
12 Sep 2012 Belgium's Reynders Eyes Swiss Tax Deal

Belgium is currently considering the idea of concluding a bilateral withholding tax accord or so-called ‘Rubik’ agreement with Switzerland, according to Belgian Foreign Minister Didier Reynders.

Based on the German model, the agreement would serve to regularize undisclosed accounts by means of a withholding tax imposed on the undeclared and untaxed wealth of Belgian residents located in Swiss banks, and to ensure that future deposits are subject to taxation.

The minister’s announcement followed a working visit to Switzerland at the beginning of the month, during which he held talks in Bern with President of the Confederation Eveline Widmer-Schlumpf. The discussions focussed on a possible savings tax agreement.

The Belgian Foreign Minister nevertheless underscored that in order for Belgium to proceed with the treaty, the provisions could only be a transitional measure. In the long-term, an automatic exchange of tax information must replace the withholding tax agreement, Reynders insisted. Reynders has estimated the wealth of Belgian citizens held in Swiss bank accounts at between EUR30bn and EUR40bn. A tax of over 30% would generate around EUR10bn for the Belgian tax authorities, the minister said. A withholding tax of 25% is envisaged for future investments.

In Germany, the bilateral tax agreement with Switzerland remains in the balance. The red-green led federal states are determined to veto the treaty in the Bundesrat, or upper house of parliament, where the black-yellow coalition no longer has a majority.

Belgian Moron

The Belgian Minister does not have a clue what he is getting involved with. " order for Belgium to proceed with the treaty, the provisions could only be a transitional measure. In the long-term, an automatic exchange of tax information must replace the withholding tax agreement."

Why would any Belgian client agree to pay a 25% regularisation fee when they could be subject to automatic exchange of information in the future?
8 Sep 2012 German opposition says Swiss concession not enough for tax deal.

Germany's opposition Social Democrats (SPD) would scupper a deal to levy taxes on German assets in Swiss bank account even if Switzerland made concessions to allow back-dated inquiries, a senior member of the party said on Saturday.

Joachim Poss said that even if Switzerland were to backdate its cooperation in hunting tax evaders, it still wouldn't be enough to sway the SPD into backing the pact.

Our objections to the pact go beyond people sneaking away money" as the pact begins to come into force, he said. "So nothing has changed in the opinion of the SPD.

Switzerland and Germany struck a deal in April to clamp down on tax evasion, but the SPD have said they will block it in the upper house of parliament, saying it is too lax. Its opposition to the deal has strained bilateral relations.

One of the SPD's criticisms has been that, as it stands, the agreement would allow people to evade taxes by taking their money out of Switzerland before the deal takes effect.

Source say Switzerland is working behind the scenes on a back-door way to resuscitate the pact without revisiting negotiations. To do so, the Swiss government could top up the German deal with so-called group requests, which allow foreign tax authorities to get at data on groups of their citizens holding Swiss bank accounts without knowing their identities.

Under pressure from the Organisation for Economic Co-operation and Development, Switzerland recently agreed to help other countries on group requests. Sources say a parliamentary commission is set next week to deliberate whether to back-date those requests, which could pave the way for Berlin to claw back money from Germans who have withdrawn funds from Switzerland since the deal surfaced to avoid detection.

But the SPD, which is gearing up for federal elections next year, is insisting on a full re-negotiation of the deal, which it has described as a cheese with lots of holes where money is sneaking away. One of the SPD's objections to the pact under dispute is that it would allow German account holders to remain anonymous.

SPD leader Sigmar Gabriel, who plans to make criticism of banks a centrepiece of the SPD's 2013 campaign, said last month Swiss banking practices in Germany were comparable to organised crime.

Berlin says the deal would enable it to net huge sums. Germans hold an estimated 150 billion euros ($184.5 billion) in Swiss accounts. Chancellor Angela Merkel's government is hoping that SPD-led regions will ultimately drop their objections and support the deal as it will bring them a huge windfall, although this looks increasingly unlikely.

Swiss roost
5 Sep 2012 Liechtenstein wants a tax treaty with Germany to get rid of its image as a tax haven. The Principality plans to exchange information with Germany modeled on the tax agreement with Switzerland .

Liechtenstein is considering automatically sharing information on bank accounts held by foreigners in the Alpine nation, enabling taxation by their home countries, Prime Minister Klaus Tschuetscher said in a newspaper interview on Wednesday.

"One can ask oneself if an automatic information exchange is not more attractive" than a system Switzerland has negotiated with several European countries that allows foreign account-holders to remain anonymous, Tschuetscher told the Swiss daily Tages Anzeiger.

According to the agreements Switzerland has reached with Germany, Austria and Britain, and which it is negotiating with Italy and Greece, foreigners with non-declared funds in Switzerland maintain their anonymity, but their assets are taxed by Bern, which in turn transfers the revenues to their country of origin.

Liechtenstein has been in talks with Germany since 2009 to find a way for Berlin to tax German holders undeclared accounts in the country.

If the German parliament ratifies the Swiss tax deal, Tschuetscher said his country would take note and would likely move in the same direction.

But if Germany does not ratify that deal, Liechtenstein will instead look closer at the pertinence of an automatic information exchange system, he said.

The Swiss system "requires a lot of manpower with the necessary qualifications to know how much tax to draw for which country," he pointed out.

"If you have to deduct 40 percent of the interest earned on capital placements, and in addition risk that something will go wrong, all in the name of preserving the client's anonymity, that is not very interesting from a banking perspective," he added.

Contrary to Liechtenstein, Switzerland has ruled out any hint of an automatic information exchange, and has stressed that if the German parliament rejects the negotiated tax deal it will maintain its current system.

That heavily bureaucratic system requires a country to make a judicial assistance request to Switzerland if it suspects a citizen of fiscal fraud.

IL Rubik moron

This is an absolute farce. Liechtenstein offers automatic exchange but identity of customers are defined by a Rubik which excludes trusts, foundations, foreign insurance, commercial purpose companies, foreign accounts, etc.

It is obvious why Liechtenstein does not offer automatic exchange of information based on the EU savings tax directive or the existing Liechtenstein Disclosure Facility for UK (which was done to poach customers from Swiss banks).

1 Sep 2012 The entire Rubik strategy of Switzerland will fail if Germany rejects the accord.

Switzerland is trying to convince as many countries as possible to accept withholding tax deals in an effort to avoid an automatic exchange of information. The success of this strategy hinges largely on Germany’s response.

“The treaty with Germany is much like a blueprint. It could open doors to other countries. If it comes into force I could imagine that Italy would also sign such a treaty,” Peter V Kunz, professor of economic law at Bern University, told “That in turn could awaken interest from France.”

Switzerland has already signed treaties with Germany, Britain and Austria that are planned to come into force on January 1, 2013. But the German deal faces the threat of being turned down by its parliament where the left leaning “red-green” political coalition holds a big majority in one of the two chambers.

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.

It is estimated that these levies would yield up to €11 billion to the German tax coffers, although no time frame was given for this bonanza.

German/Swiss opposition

German Social Democrats and Greens have criticized the indulgencies in the deal that would allow tax offenders to remain anonymous and various other loopholes in the text. They also argue that the treaty would favour cheats over honest tax payers.

The German parliament is expected to make a final decision in November, while voters in Switzerland are likely to have the final say on the agreement.

Two diametrically opposed political groups – the right wing Campaign for an Independent and Neutral Switzerland and the youth chapter of the Social Democratic Party are pushing for a referendum against the deal.

In the eyes of the right wingers, the treaty would be “unacceptable and degrading” and a “further capitulation” to foreign pressure. The left leaning Young Social Democrats want to see an end to banking secrecy and the adoption of automatic exchange of tax information. The deadline for gathering signatures expires at the end of September which could pave the way for a referendum on November 25.

Olive branch

Withholding tax is Switzerland’s response to increasing international pressure against banking secrecy. “We are hardly going to win a global round of applause because many countries are demanding an automatic exchange of information,” Michael Ambühl, head of the State Secretariat for International Financial Matters, told the Neue Zürcher Zeitung newspaper. But he added that he knew of “hardly any experts in these countries that do not view withholding tax as an interesting alternative.”

“The difference between now and before is that Switzerland is no longer simply saying no,” Ambühl said. “We have offered a convincing alternative.”

Switzerland had held expert talks with the governments and other stakeholders at various countries, also outside of Europe, without gaining a concrete indication of which one would be willing to open negotiations.

Rubik Germany in tatters

Willing partners?

It is clear that the highly indebted countries of Greece and Spain would be interested in such deals because it would allow them to collect revenues for their ailing coffers in the short-term, according to economics expert Kunz.

Beyond that Kunz could imagine that Switzerland could conclude similar deals with countries such as China, India and Russia. He believes that is “important” for Switzerland to establish a “new standard to automatic data exchange” with its withholding tax proposal.

The treaty with Germany could act as a spark, at least within Europe. Countries such as Russia or China are “less important”, but Germany could act like a locomotive within the European Union. Germans have deposited the most undeclared money in Switzerland, followed by Italy.

If the treaty with Germany fails then “the idea of a withholding tax is dead”, according to Zurich banking expert Hans Geiger, who believes that the deal with Germany formed the basis of a similar treaty with Britain.

Here to stay or gone tomorrow?

The treaty contains a most favoured nation clause “which means that if Germany improves its position then Britain’s outlook would also be improved”, Geiger told The failure of the German deal would mean that “the foundation of the British treaty, at least in its current form, would be lacking.”

However, Sergio Rossi, economics professor at Fribourg University, does not think that the failure of the German treaty would necessarily influence other countries not to sign.

Nevertheless, Rossi believes that it is important both for Swiss banks and German clients to get the treaty in force. “If there is no agreement it would signal a capital flight of German clients to tax havens like Singapore or Hong Kong,” he told

“Germany has an interest in agreeing to the treaty, but perhaps at a higher tax rate,” Rossi added. “There is already significant pressure in Germany to increase this rate.”

Rossi views the withholding tax treaties as “buying time” during a “transition phase” that would push “an automatic exchange of information as far away as possible”.
31 Aug 2012 Why Rubik fails with Germany.

Discusses why automatic exchange of information with EUSD is only solution. Original German article.

The tax treaties Germany - Switzerland is likely to soon fail. According to the factual presentation of Norbert Walter-Borjans in the arena, the number of Swiss citizens who understand why this is so and why this is good.

The agreement should not fail only because those who have given black money in Switzerland, with the agreement too good to get away and be rewarded for being unable to meet their tax obligations partout want. It should not fail only because they their black money at a bargain price can white wash, where the deeper meaning of the so-called "white money strategy" is - in the white washing of dirty money that is on the banker thus continue to do business. It should not fail only because the criminals control the Abschleichen is allowed, by the way probably less to Singapore rather than the fact that they, together with Liechtenstein, behind anonymous foundations can hide and the banks to help them. Rather it should fail because it is based on the false principle, namely the principle of compensation.

Banking secrecy Patriots do not understand the facts

The circle of banking secrecy Patriots has shrunk and split in both proponents and opponents of this Agreement. Banking secrecy Patriot can really only be one who understands the offense not to is at stake here. It's not about the way how Switzerland taxed their residents. It's all about getting that non-residents, so taxpayers who live abroad, for instance in Germany, and Switzerland, normally would have nothing to do, can help with some Swiss banks and Swiss law rid their tax obligations. If you understand this fact, you could hardly get the idea, those described as "traitors", the foreign, the information would no longer be withheld longer it takes to tax its taxpayers. Unless one sees in abetting tax evasion part of Swiss identity. Such as SVP National Caspar Baader, who replied to my issue raised by what right the Switzerland-resident taxpayers exempt from taxation in their country of residence, that Switzerland was just a " freedom-loving country ". Baader apparently sees in Switzerland a kind pirate State wishing to deprive the community of their tax substrate wherever goes.

This is not the considered opinion of the majority of the Swiss people, with 56% of the abolish bank secrecy for tax exiles want. The results of this survey in 2009 should now be even more significant.

The last attempt to take Switzerland as a banking service in Republic

The current tax treaty is the last attempt of the Swiss retail and wholesale banks, hijack the Swiss rule of law for their private purposes and therefore morally corrupt. So that Switzerland has been transformed into a kind of Republic Bank, which, until late in the administration in, the bankers reads every wish of the lips or the same can write the laws. Also, it is the last attempt to stop what is already unstoppable, namely the global transition to automatic information exchange. But this is in a position to guarantee the tax sovereignty of the states in terms of capital taxation and thus the uniformity of taxation.

As the architect of the tax treaty, Konrad Hummler, learned of the signing, he escaped his own words "after a full hot ". As the percentage of people who find within Switzerland the "full hot" what bankers are "full of cool", is on the wane, this would have to make suspicious.

The tax treaties attempt to establish a compensation regime. According to this, only labor income subject to progressive tax rates. Capital income is taxed on a fixed percentage ("flat tax"). Even billionaires should only pay 25% tax, even though the top rate in Germany is 45%. (He was up in the 1980s, far in all industrial countries about it.) This is a tax advantage of capital income.

Significant changes to the fiscal autonomy of Germany

"But it makes it so her but also in Germany," contact the bank lobbyists and government officials who have declared their interests to one country's interests. This is a cynical note. Germany has introduced in 2009, in fact, a final withholding tax. This does not act as an autonomous decision, but because it did so to prevent that even more money to Switzerland (and other tax havens) run off. "Better 25% on X, as 42% of nothing", so had Steinbrück justified this preferential treatment of capital income.

One sees that the intervention of tax havens in the legitimate tax sovereignty of other states clearly goes further than you might initially assume. It is not only procured from Germany to Switzerland in black money orders of magnitude somewhere between 100 and 300 billion euros to Germany was stripped of its tax. It's much more than that actually flowed out tax base. Switzerland has withdrawn foreign control means in trillion range. Manfred gardener comes from the University of St. Gallen in an amount of 3.6 billion francs. The banking secrecy to the outside world to prevent the States may tax the capital appropriately. It performs abroad in writing the tax laws in a perfidious manner the spring.

Switzerland, forcing Germany to a compensation regime

Switzerland has scored Germany in terms of capital taxation ripe for attack, so to speak. And now that should be established by reference to the compensation regime for a permanently established tax treaty between Switzerland and Germany? Gohts no? The flat tax unconstitutional in itself contrary to the principle of equality of the German Basic Law clearly could continue from the Federal Constitutional Court to be approved. But only because there are "implementation problems" in the collection of taxes, through the many transferred abroad "flight capital". These "gaps" in which "equality fair enforcement" of German tax law, the Constitutional Court can not be attributed Germany. They result from acts of foreign yes, that is also and above all in Switzerland. For abroad, the German Constitutional Court, however, has absolutely no authority.

So Switzerland should introduce automatic exchange of information, the German withholding tax should be cashed quickly, since it contradicts the principle of equality and Germany can remedy this. The Agreement, however, this route would permanently installed. Germany would indefinitely forced to give preferential treatment to the capital income tax. One may understand why the tone between the two countries that speak the same language fails, sometimes very sharp.

Sold for stupid

"Full cool" find the bankers the tax treaty course because ensure a final withholding tax at best the taxation of interest, that drops the black money can (and this even in highly imperfect, progressive taxation under current type), not the taxation of black money itself . For how stupid the bankers actually think Germany? Only 3% interest should be taxed, not 100%, not the millions who continue to be displaced on tax evasion in Switzerland are, just the thousands. It is immediately evident why the evaluation of "stolen" data bank, the tax-relevant information content belongs anyway, Germany will, under the regime of targeted tax treaty continue to promote tax salary Full-days.

Everything presses to automatic information exchange

The equality fair enforcement of taxation can only be assured by an automatic exchange of information. (Out this must be because the applicant states otherwise, "what did they prove with Swiss bank records, already detected in the request for legal assistance must ", which would be recognizable nonsensical.) That the international community has understood, and that's why everything is going in this direction. Switzerland has just FATCA must sign, which will establish the automatic exchange of information with the U.S.. All she could do nothing for it because no bank - and the Swiss government sees itself as representing the interests of a part so their banks - to the huge U.S. capital market comes around, and the United States may regulate this course. Even China has recently argued for the automatic exchange of information. Singapore will accept no European black money. Most important, however, is that the EU in 2003 with the Savings Directive has introduced the automatic exchange of information. The only transitional exception of Luxembourg and Austria.

The attempted coup of the lag of the EU Member States

"Full horny" is the tax agreement from the perspective of the banking lobby mainly because with it a swathe of the compensation regime to be beaten in the growing forest of automatic information exchange. Ungeschminkt announce the bankers that the compensation regime to mind the widespread establishment of automatic information exchange "in Europe to prevent "and besides this a compensation regime" to permanently anchor ". Thus, the inflow of tax revenue is not separate, because Switzerland would offer thus continue a "durable" haven for tax evaders, which the rest of Europe with their tax obligations could evade otherwise not while their black money also allowed white wash cheap. You can see why the Swiss bankers call the bank secrecy secret evasion, but bank customer secrecy.

This deal will only work if the tax treaty between Switzerland and Germany does not fail. Because if it fails, are the only two breakaway states, Luxembourg and Austria, their obstructionism and must give their agreement on the mandate of the European Commission for negotiations with Switzerland on the introduction of automatic information exchange. And that with the EU intimately connected Switzerland must make this clear to legitimate concerns of the EU result is absolutely no doubt about it.

So far, Luxembourg and Austria could not excuse the fact that Switzerland is the first with an automatic exchange of information to the " equivalent "solution must agree. Only what was below the threshold of an automatic exchange of information can ever be considered as "equivalent"? In the official version, these are the minimum standards of the OECD Model Tax Convention, which just exacerbates were recognized what needed to Switzerland. An alternative could be to arbitrarily redefine this. How about, one would find a state that the compensation regime classified as "equivalent" and thus constitute international law ennobled. The month of August has been found in Finance Minister Wolfgang Schäuble, who may currently represented Germany officially in tax matters. ( Markus Meinzer the Tax Justice Network is the behavior Schauble or the federal government no explanation other than that they want to spare "very wealthy CDU and FDP voters or party veterans" the prison.) Schäuble in the tax treaty agreed to the formulation of this compensation regime would "the automatic exchange of information in the area of ​​investment income in its effect constant over time." "Full cool!"

Immense damage

All they have taken to the cleaners, these bankers. Pride goeth before the fall known. Konrad Hummler has dropped. And the Bankers Association has formed a working group to explore what. The unthinkable, but unstoppable, namely the introduction of automatic information exchange, mean for the Swiss banks is Schlaumeierischen and lobbying for the financially well-equipped bankers have caused immense damage - not only financial damage abroad, but also moral damage to the integrity of Switzerland as a state of law. Will they ever have to adhere to?
30 Aug 2012 The tax treaty between Switzerland and Germany probably fails.

Uff. Also many a bank employee may drop soon a sigh of relief. More likely, is that the tax treaty with Germany is doomed to failure , and this in turn would not only social democrats from Wuppertal. "I can see a lot of investment savings," says the head of a well-known private bank in the German-speaking Switzerland, "investment in training, forms, IT, surveillance, in accountants and lawyers." And last Friday, in presenting its half-year results, announced the top of Basel Kantonalbank openly what she thinks of the agreement. "The automatic exchange of information would be more favorable to us," said Beat Oberlin, president of the institute. Simon Leumann, responsible for strategic projects point man reckoned equal before and how many problems it would bring into the house of the contract: What the politicians had since negotiated and renegotiated hinterhergebessert directly, but was not nearly in the Cantonal implement reliable and timely manner. Oswald Grübel, the most prominent bankers in the country, had his verdict before the national debate in April. "If I were in Parliament," he told the Tages-Anzeiger , "I would vote against it."

Uff. The contract that the Finance Minister Wolfgang Schaeuble and Eveline Widmer-Schlumpf had signed in September 2011 split, not only in Germany and Switzerland, not only Swiss banks and other Swiss, he does not drive alone Rhenish Social Democratic and Christian Democratic federal politicians against each other - but it is in this country often perceived as an unpopular interim result. SP-Left and SVP rights are even agree that there should be no more, and it was not a bluff, as Ambassador Tim Guldimann, our man in Berlin, last week publicly warned against that sentiment in Switzerland against the agreement could tip. If politicians like Norbert Walter-Borjans on television in all seriousness, may request that identify German authorities in Switzerland have, the No in a referendum is actually in sight.

So now back to square one. "The contract would have both sides," brought something, says Hans-Peter Portmann, financial expert of the FDP and the Vice President of the Zurich Banking Association. But his grief over a failed agreement were speaking fairly limited: "If Germany the Courant normally chooses, we have to accept that," For the Courant normally include but recently all sorts of political skirmishes, pressure waves against Swiss banks, moral debates, CD. rumors and unsettled German bank customers - but then again, the Swiss side can here simply insist on the existing OECD model treaties and double taxation treaties: This applies. Automatic information exchange, as proponents of the opponent plus Schäuble warned Treaty paint on the wall, is currently not an issue.

Where we are headed is clear anyway - even without Germany Contract

After all, Switzerland has for some weeks ratified settlement agreements with Britain and Austria, similar negotiations with Italy and Greece. According to good sources interested a handful of other states for the control model, in which the Swiss banks to transfer a lump sum to the relevant tax authorities in the home countries of their customers. What the outcome is, however, an open question, because as long as from Chur to Geneva to collect signatures against the tax treaties signed, waiting for the Ministry of Finance in Bern from dear.

Would bring if a deal with Berlin here fresh momentum remains speculation. But anyway, the tangible benefits of the contract - from the Swiss perspective - quite manageable. Comes through the thing that would give Swiss banks sneak in an important country from the political line of fire, the back and forth of CD sales and CD Bluffs, would find of claims and counterclaims over. And since the new contract legalized in one fell swoop all German illicit funds and provides for future tax compliance, should the banks herausspedieren their German customers not quite as rude, as they have shown us with their U.S. customers.

Where we are going, is already clear for some time - with or without Germany Contract. Against outside Switzerland has committed to three years to comply with the OECD standards and assist in suspected tax evasion assistance. Inside the banks promise as long as a "white money strategy": Waking the suspicion of wanting to avoid the IRS, will be rejected. Existing Schwarzgeldkonti want to degrade steadily.

Will that be enough? If one can believe the banks? Whether the change occurs quickly enough? Whether the political pressure is not too much before? These are the other questions. After all, the European Commission has an interest in contracts that suffer like that between Bern and Berlin shipwreck. The aim should be a Switzerland agreement for all EU countries, calls for tax commissioner Algirdas Šemeta. This Agreement shall in turn deliver the glass taxpayers - the automatic exchange of information. The Treasury would then look beyond national borders in the accounts, the banks would have to notify the authorities in the home country on the interest income of their customers. However, such a treaty nor the purest mirage, an idea that is because of opposition from Luxembourg and Austria will not even fully implemented in the EU. The Commission is still lacking even the mandate, to demand something in Bern.

So what is is, the so-called OECD standard, and which states that - for example - the North Rhine-Westphalian tax authorities in cases of suspected fraud must each submit a single request for administrative assistance in Bern. So it is today, and it is the intention of the SPD-led states probably still be a long time, after all, the recently adapted OECD Model Treaty does soon also group requests, at least under certain conditions. Conversely, the Federal Council may now insist on these international meta-contract - at least as long as powerful nations like the U.S. and major financial centers such as Singapore automatism also deny the information. "It is possible that the automatic exchange of information once an international standard. Then we will submit ourselves this too, "How To Credit Suisse president said Urs Rohner recently in Die Zeit . "But that would mean that all countries would have to abide by it, and very large."

29 Aug 2012 Greece almost completes Rubik agreement with Switzerland.

For years, Greece has been pledging to redouble its efforts against tax evasion. Only now, however, is Athens finally set to sign a tax deal with Switzerland in the hopes of generating billions in revenue. Critics, though, say the agreement won't make much of a difference.

Greek Bankrupt drunk

28 Aug 2012 Switzerland announces official talks with Italy on Rubik.

Federal Council adopts the mandate for negotiations with tax and financial Italy Bern, 29.08.2012 - At its meeting today, the Federal Council adopted the text of the mandate for negotiations on tax and financial with Italy. This text sets out the key issues on which negotiations should be based. The objective is to continue the strategy of the Federal Council for a financial competitive and consistent with the tax rules and consolidate bilateral economic relations with Italy.

May 9, 2012 Switzerland and Italy have renewed their bilateral dialogue on tax and financial matters. The parties expressed their willingness to address five priority themes: the regularization of the assets of Italian residents in Switzerland and taxation at source of future income capital market access, the revision of the bilateral double taxation agreement , blacklists and Italian taxation of frontier workers. On this occasion a bilateral steering group was established to conduct these negotiations.

In addition, the President of the Confederation Eveline Widmer-Schlumpf and Italian Prime Minister Mario Monti had met twice, in Rome June 12 and August 17 in Silvaplana. They expressed their willingness to move negotiations quickly and asked the Steering Group to submit proposals by the end of autumn.

23 Aug 2012 German opposition gets acrimonious and bitter against the tax agreement.

It looks like there is little chance the tax agreement will be ratified in November.

Merkel fights SPD

17 Aug 2012 Italy's Monti talks tax pact with Swiss Finance Minister.

Italian prime minister Mario Monti, on vacation in the Swiss alps, and Switzerland's finance minister Eveline Widmer-Schlumpf discussed on Friday negotiations for a deal to tax assets stashed by wealthy Italians in hidden Swiss offshore accounts.

"They confirmed the great importance they attach to swift progress in finding constructive solutions to the remaining issues," the Swiss government said in a statement.

"They expect the working group to present them with concrete proposals this autumn," the government said.

Monti met Widmer-Schlumpf in Silvaplana, a tiny lakeside village near to St. Moritz where the Italian official is currently on holiday.

The two countries in May began discussing a tax deal, which would retroactively tax undeclared funds and potentially net Rome billions of euros of badly needed revenue.

Under the deal, which mirrors similar ones struck with Germany, Britian and Austria, Switzerland will act as a tax collector for a one-off levy on undeclared money but Swiss banking confidentiality will be preserved as no names of account holders will be divulged.

There is no official data on how much undeclared Italian money sits in Swiss accounts, but some estimates put it at between 100 billion and 200 billion euros.

Switzerland is for its part seeking greater access to financial markets through the tax negotiations, as well as to be removed from an Italian black list that rates it as unwilling to cooperate on tax issues.

25 Jul 2012 The Swiss State Secretariat for International Financial Matters who negotiates the Rubik agreements with UK and Germany really has a sense of humour.

They give examples of how Rubik agreement residents will pay regularisation of past balance assets. They enumerate 12 situations of how the tax will be applied. They give the examples for:
  1. A lawyer
  2. A craftsman
  3. A car dealer
  4. A pensioner
  5. A doctor
  6. An artist
  7. The brother of the artist in example 6
  8. A management consultant
  9. A dentist
  10. A market stallholder (I'd like to sell what he sells. Perhaps he's the pensioner from example 4)
  11. An architect
  12. The twin sister of the architect in example 11

They must have forgotten the butcher, the baker and the candlestick maker. Actually SIF are masters of diverting attention from Rubik's loopholes by pointing only to the little folks and omitting entities and legal arrangements which account for over 75% of all accounts.

If SIF are embarrassed and remove the link, a backup copy of their demonstration is here.
Note: there is is no description at all how Rubik will not apply to entities and legal foundation or foreign insurance wrappers or untaxed commercial entities. Maybe they didn't have the time or space to do these.... The point of Rubik is that it is full of loopholes which doesn't touch trusts, foundations, establishments, establishments, non-Swiss insurance, foreign accounts, untaxed commercial entities, undeclared, taxed entities which remain undeclared, etc.


"You see, only poor little pensioners and market-stall owners open Swiss bank accounts and they will be caught by the draconian Rubik, nudge nudge, wink, wink".
12 Jul 2012 Cyprus promises to spare no effort to break the gridlock.

Despite its traditional reservations over European plans for tax harmonisation, Cyprus promises to spare no effort to break the gridlock on certain sensitive issues. Nicosia can count on the support of the Commission, which is determined to move forward.

The ‘Compact for growth and jobs’, adopted by the heads of state and government on 29 June, reads: “Tax policy should contribute to fiscal consolidation and sustainable growth. Work and discussions should be carried forward on the Commission proposals on energy taxation, on the common consolidated corporate tax base and on the revision of the Savings Tax Directive. […] Rapid agreement must be reached on the negotiating directives for savings taxation agreements with third countries”.

Wishful thinking? Savings taxation has been blocked for two years, as Luxembourg and Austria refuse to sacrifice their banking secrecy on the altar of Europe.

“We will do our best” to bring about a positive change in the situation, say the tax experts at the Permanent Representation of Cyprus to the Union, who will continue bilateral talks with Luxembourg and Vienna. There is no guarantee of success, though. “This is a highly political subject” set to be on the agenda of the 13 November Ecofin Council but it “will probably be easier to resolve at European Council level than by the 27 finance ministers”.

This is a priority for the Commission. It is “vital” that the 27 agree on extending the directive’s scope and give the green light to renegotiating the EU’s savings taxation agreements with Switzerland, Liechtenstein, Andorra, San Marino and Monaco, it states in the communication on ‘Concrete ways to reinforce the fight against tax fraud and tax evasion, including in relation to third countries’, presented on 27 June.

6 Jul 2012 Austria ratifies tax deal with Switzerland

The Austrian parliament has given the go-ahead to a bilateral deal with Switzerland aimed at legalising undeclared assets in Swiss banks and introducing a withholding tax, completing the ratification process for the accord signed in April.

The Social Democrat and Conservative parties, both members of the governing coalition, voted in favour of the accord, which should come into force on January 1. The Swiss parliament had already ratified it during its summer session.

Austrian Finance Minister Maria Fekter told parliament that it would be wishful thinking to expect the Swiss to give up on banking secrecy. “We sought a way and a solution to impose a fair taxation of funds deposited by Austrians in Switzerland,” she said.

Opponents of the deal however called it a law designed to prop up the budget, stating either it had little to do with fiscal justice or that it was a slap in the face for honest taxpayers.

Under the agreement, residents in Austria can make a one-off payment – at a rate of between 15 per cent and 38 per cent on the assets concerned - or disclose their accounts to regularise their existing banking relationships in Switzerland.

Future investment income will be subject to a withholding tax at a rate of 25 per cent. In 2013 alone, the total collected could be worth €1 billion for the Austrian finance ministry.

Both countries also agreed to ease access to cross-border financial services and facilitate conditions for banking licences in Austria.

Rubik trio

However, its implementation could well depend on a nationwide vote in Switzerland in November if organisations such as the Action for an Independent and Neutral Switzerland, the youth section of the rightwing Swiss People’s Party or the centre-left Young Social Democrats collect the 50,000 signatures required to force a ballot.

If they do, voters will have to decide whether to accept the Austrian deal, along with two other so-called Rubik accords signed with Britain and Germany.

These two deals have yet to be ratified by the British and German parliaments. The German Senate, which represents the federal states’ interests and dominated by the centre-left Social Democrats, is particularly hesitant about giving the green light as many of its members fear tax cheats will be let off too lightly.

These treaties have been Switzerland’s answer to mounting calls from the European Commission for an automatic exchange of tax information, that could spell the end for banking secrecy.

In exchange for cloaking the identity of offshore account holders, Rubik promises to pay compensation for past tax dodging and compel banks to cream off a withholding tax on the future profits of client assets.

However the EC has threatened legal action because it believes these accords infringe the Savings Directive – an existing agreement for Swiss banks to levy withholding taxes on the accounts of European Union clients.

20 Jun 2012 EU Commission plan on tax fraud and tax evasion due this year.

The European Commission will announce, on 27 June, its intention to propose a detailed action plan, by the end of 2012, designed to scale up the fight against tax fraud and tax evasion in the Union and in relation to non-EU countries.

The Commission presents the outlines of this plan in a communication drafted at the request of the European Council, which will meet on 28-29 June. In parallel, the Danish EU Presidency has also drafted a grim report on tax issues for submission to the 27 heads of state and government.

The executive's communication, seen by Europolitics, is both very political and very technical.

With the black economy making up 19.2% of the Union's GDP and member states desperately seeking new tax revenues in the context of the economic crisis, the Commission insists on the pressing need to combat tax fraud and tax evasion energetically. It suggests three lines of action: improved tax collection (especially for VAT); enhanced administrative cooperation between member state tax authorities; and adoption of a "clear and coherent" policy towards third countries.

The Commission considers it "vital" for the 27 to agree without delay to extend the scope of the Savings Taxation Directive. It is extremely determined: the Union must make the automatic exchange of tax information the general rule on its territory and "promote" this model outside its borders so as to contribute to the development of the OECD's international standards on transparency, based today on the model of exchange of information on request. The US Foreign Account Tax Compliance Act (FATCA) "opens new perspectives" in this respect, it adds.

In parallel, "it is essential to improve the identification of taxpayers" in the EU. The Commission will therefore conduct an impact study on the possible creation of a European "tax identification number" (TIN).

Other initiatives are also announced. The Commission wishes to extend Eurofisc to direct taxation, will propose (in July) a quick reaction mechanism on VAT fraud, intends to develop a strategy for tackling "artificial tax planning" and is considering the creation of a European "taxpayers' charter" and an EU "minimum level of sanctions" against tax fraudsters and evaders.

The EU executive also calls on member states to apply "a coherent policy" towards third countries in general and tax havens in particular.

Offshore financial centres with banking secrecy laws continue to dominate the international cross-border deposits market, notes the Commission. Switzerland and the Cayman Islands alone, with a total of US$1,352 billion in non-bank deposits, represent almost 20% of all worldwide non-bank deposits. The report adds that the sums held indirectly by EU investors through tax havens in Switzerland alone is 4.5 times as much as money held directly by such investors.

Another indication of the "magnitude of the problem" that Switzerland represents for the EU as a whole: the United Kingdom hopes to recover GBP4-7 billion from the regularisation of assets hidden from UK tax collectors, via the Rubik agreement concluded by London and Berne.

For the Commission, it is urgent for the Council to give its green light to the renegotiation of the EU-Switzerland agreements on savings taxation and combating fraud.

The Commission's communication notes that with a view to building a "favourable tax environment" for the EU, the problem of unfair tax competition also needs to be addressed in the context of business taxation.

The executive intends to present a communication on this subject towards the end of the year, it notes. Its aim is "to establish a set of measures, procedures and tools for coordinated action," which could include "a combination of defensive measures or sanctions" against countries that practice unfair taxation.

18 Jun 2012 Germany's SPD Set On Opposing Swiss Tax Deal.

Threatening a collapse in the Bundesrat, Germany’s main opposition party the Social Democrats (SPD) remain opposed to the tax deal concluded between Switzerland and Germany, aimed at resolving the longstanding issue of undeclared, untaxed assets held by German residents in Switzerland.

The Social Democrats are calling for greater concessions from the Confederation and for tougher action to be taken against tax evaders.

According to North Rhine-Westphalia’s Minister for Federal Affairs Angelica Schwall-Düren (SPD), progress made so far in the ongoing negotiations between the coalition government and opposition parties is not enough to secure the backing of the SPD-led states.

Insisting that the text in its current form is simply not ready to be put to the vote, Schwall-Düren underscored that North Rhine-Westphalia would prefer to do without the agreement rather than vote in favour of the accord as it stands.

Outraged by the SPD’s stance, and reflecting the view of Chancellor Merkel’s Christian Democratic Union (CDU) party, Bavaria’s Minister for Federal Affairs Emilia Müller (CDU) warned that a collapse of the tax deal would lead to a loss of revenues for the German tax authorities of billions of euros.

The SPD must give up its opposition to the agreement, Müller demanded, emphasizing that the SPD’s “unrealistic” position will merely serve to endanger vital infrastructure and education projects in Germany.

The German cabinet adopted the bill implementing the bilateral tax agreement with Switzerland at the end of April.

Describing the bilateral tax treaty as a 'landmark' in Swiss-German relations, the German finance ministry said at the time that the deal will ensure the equal treatment of the wealth of German citizens, whether located in Germany or in Switzerland, and will restore tax equity for the past by means of a lump sum taxation.

Following significant concessions from Switzerland, the cornerstones of the agreement are now as follows:

Following entry into force of the treaty, the capital deposits of German taxpayers located in Switzerland will be taxed at the same rate as applied to capital investments in Germany; In the future, German heirs will either agree to a 50% tax levied on inheritances, or to a full disclosure; The taxation of wealth will in future be assured by means of an exchange of tax information, which goes beyond the international Organization for Economic Cooperation and Development standards, to ensure that no new deposits of undeclared wealth are hidden in the Confederation; As regards the past, German residents can opt either for a flat tax imposed on capital or to submit a self-declaration. Otherwise, cases will be pursued; and If German taxpayers relocate wealth from the Confederation to a third country, Germany will be able to obtain information from Switzerland regarding the precise flow of money, following entry into force of the treaty.

According to the German finance ministry, the agreement will receive a significant portion of the revenues accruing from the agreement.

A first installment of CHF2bn (USD2.2bn) is due to be paid to the German state directly following entry into force of the accord.

Defending the agreement as the best and most comprehensive means of resolving the situation, the ministry warned then that failure to implement the agreement would be the worst outcome for all parties involved, as millions of irretrievable tax assets would continue to be lost every year.

Yet without the backing of federal states led by the SPD and the Green Party, the coalition will be unable to secure the necessary majority in the Bundesrat, or upper house of parliament, to adopt the text. Further negotiations between government and opposition parties are expected.

12 Jun 2012 Switzerland, Italy May Reach Tax Deal in Months

Switzerland aims to reach an agreement on tax and financial negotiations with Italy within the next few months, Swiss President and Finance Minister Eveline Widmer-Schlumpf said.

“We agreed on the need to press ahead with tax and financial negotiations between our countries in order to reach a solution within the next few months,” Widmer-Schlumpf told reporters at a joint briefing with Italian Prime Minister Mario Monti in Rome today. “Switzerland wants to be a strong financial center with no undeclared money.”

Switzerland has already clinched deals with Germany, the U.K. and Austria to rid itself of its image as a haven for untaxed assets. The accords came after the Swiss government agreed in March 2009 to meet international standards to avoid being blacklisted as a tax haven by the Organisation for Economic Cooperation and Development. The country struck a tax accord with Italy in 2001, while attempts to agree on a revision failed in 2009.

Monti and his Swiss counterpart held talks on resolving differences on double taxation and sharing information to fight tax evasion, the Italian premier said. He added that fighting evasion is a “priority,” for his government.

The two countries are seeking to reach an agreement to deal with double taxation, information sharing on potential evaders and other fiscal issues, according to Widmer-Schlumpf.

4 Jun 2012 Not so fast with Rubik after vote fails in Swiss lower house of parliament

While the Swiss National Council, or lower house of parliament, has approved in principle the tax agreements with Germany, the UK, and with Austria, it has rejected the underlying framework law.

The outcome of the vote follows hot on the heels of the earlier go-ahead given to the bilateral tax deals by the Swiss Council of States. An optional referendum on the agreements is provisionally scheduled to take place on November 25.

Yet in a surprise turn of events, and due to opposition from both the Social Democrats (SP) and the Swiss People’s Party (SVP), the National Council rejected the framework international withholding tax agreement, implementing the tax accords in Switzerland. The bill was narrowly rejected by 89 votes to 85 with 5 abstentions.

The Social Democrats are in favour of ultimately striving towards an automatic exchange of information, and consider that the withholding tax model may serve to prevent this goal. The SVP argues that Switzerland has had to make too many concessions.

During the course of the debate, Swiss Finance Minister Eveline Widmer-Schlumpf once again defended the agreements, underscoring that the previous model of accepting untaxed money is no model for the future.

Based on a withholding tax model, the inter-governmental treaties concluded recently between the Confederation and Germany, the UK, and Austria, are designed to legalize the undeclared, untaxed assets held by wealthy foreign residents in Swiss banks, applicable to both old money and to future investments.

The agreements are due to enter into force following ratification by the relevant treaty partner states on January 1, 2013.

The framework law will now return to the Swiss Council of States for re-examination.

If automatic exchange of information occurs in EU or Switzerland, it will be implemented via the EU savings tax. This contrasts radically with the US version of automatic exchange of information imposed via FATCA. The US insists on names to be provided for any account owned by taxable US person. Whereas the EU savings tax imposes automatic exchange on any EU resident who earns interest. The difference is due to the different fiscal treatments of investments within the EU. Not all EU Member States tax capital gains or dividends, whilst all do tax interest. That is why exchange of information within the EU is based only on interest. This will be imposed on Switzerland via the EU savings tax. No other method is contemplated by the EU Commission. At least not yet...
31 May 2012 Impasse unless Luxembourg and Austria obtain extension of transitional period.

Barring any surprises, the Danish EU Presidency will probably present to the European Council of 28-29 June a lacklustre appraisal of its accomplishments in the field of taxation. The member states' high-level working group on taxation debated, on 30 May, the draft report to the Ecofin Council, drafted by Copenhagen at the request of the European Council.

On 2 March, the EU heads of state and government invited the Council and Commission "to rapidly develop concrete ways to improve the fight against tax fraud and tax evasion, including in relation to third countries, and to report by June 2012". They added that "work and discussions should be carried forward on the Commission's proposals on energy, taxation, on the common consolidated corporate tax base (CCCTB), on the financial transaction tax and on revision of the Savings Tax Directive. The negotiating directives for savings taxation agreements with third countries should be rapidly adopted".

The Danish Presidency's draft report, which will be submitted to the 27 finance ministers for approval on 22 June, will be revised. Yet nothing fundamental will be changed in the absence of an unexpected turn of events: it will present very limited results. While work on reform of the VAT system and on administrative cooperation on excise duties has advanced satisfactorily, the same cannot be said for the matters mentioned by the European Council.

CCCTB: "Substantive objections"

The text notes that "it has not been possible at this stage to come to agreement" on savings taxation (revision of the directive and opening of negotiations with Switzerland, Andorra, San Marino and Monaco) and revision of the directive on interest and royalty payments between associated companies. "A number of member states maintain substantive objections" to establishment of the CCCTB ("technical" work has to continue), although Copenhagen considers it "necessary to examine possible alternative solutions" to the FTT due to the persistent reluctance of many countries to endorse the Commission's proposal.

During the debate, on 30 May, Luxembourg and Austria confirmed that they are "fully prepared" to give the Commission their green light to renegotiate the EU-Switzerland agreement on savings taxation, provided that the talks cover only Berne's application of measures equivalent to those in force in the Union (which is considering extending the scope of its legislation) and without taking account of "international developments" on administrative cooperation. According to the Presidency, those developments justify a switchover by Luxembourg and Vienna from withholding at the source to automatic information exchange, thus abolishing their banking secrecy.

Luxembourg and Austria would first like to see an EU debate on these "international developments," which they claim would reinforce the basis for the mechanism of anonymously levied taxation at the source: the Rubik agreements that Germany, the United Kingdom and Austria have concluded with Switzerland are based on this model.

18 May 2012 Luxembourg Defends Savings Tax Opposition.

During the recent European Union (EU) Economic and Financial Affairs Council (Ecofin) meeting in Brussels, Luxembourg’s Finance Minister Luc Frieden defended his decision to block the European Commission’s plans to negotiate new and stronger savings tax agreements with third countries, insisting that given recent developments, the automatic exchange of tax information is not necessarily the only solution to combating tax evasion.

Lamenting the lack of debate and spirit of openness, Luxembourg’s Finance Minister said that he had sought to initiate a discussion in Brussels with his European counterparts and with the European Commission on international developments that had taken place since the adoption of the Savings Tax Directive in 2003.

During the course of his intervention, Frieden highlighted the fact that at the time, the automatic exchange of tax information was considered to be the only means with which to combat tax evasion. Since then, other developments have shown the efficiency of the withholding tax system.

Alluding to the fact that Luxembourg has been “regularly stigmatized” for blocking the Commission’s plans, thereby preventing the introduction of an automatic exchange of information in the EU, Frieden underscored the complexity of the debate, which, he argued, could not simply be reduced to “for or against” banking secrecy, as the Commission has suggested.

While emphasizing that Luxembourg is indeed also committed to combating tax evasion, the minister nevertheless insisted that efforts to guarantee the protection of client banking information should no longer be considered synonymous with non-transparency within the framework of international co-operation.

Pointing out that a number of European countries currently apply a system based on withholding tax, Frieden confirmed that such a system is also applied in Luxembourg, both at national and at European level. Luxembourg’s system is based on a double mechanism, the finance minister added, notably on an exchange of information on demand and a withholding tax at source, guaranteeing effective taxation, the transfer of tax due by non-residents to their country of origin, and the transfer of information upon request, in clearly defined cases.

The recent conclusion of bilateral withholding tax accords between Switzerland and Germany, the UK and Austria, introduces a new element, Frieden continued, namely the recognition by the UK and Germany, two countries in Europe, of the withholding tax principle applied in a third country.

Concluding his remarks, and underscoring his willingness to find a compromise, Luxembourg’s finance minister said that the ongoing debate, which has so far failed to reach an acceptable solution, should now focus on the efficiency of both models in combating tax evasion.

Frieden proposed limiting the mandate to merely extending the field of application of the Savings Tax Directive, to increase the efficiency of the current system.

Much to the deep annoyance and extreme frustration of European Union Tax Commissioner Algirdas Semeta, both Luxembourg and Austria blocked the European Commission’s plans aimed at strengthening cooperation in tax matters.

The European Commission had sought a negotiating mandate from EU finance ministers to strengthen common instruments against tax evasion by concluding a treaty with third countries, including Switzerland, Monaco, Liechtenstein, Andorra and San Marino, providing for application of the EU Savings Tax Directive in these jurisdictions.

In application since 2005, the EU Savings Tax Directive regulates the automatic exchange of information on the savings income of European Union citizens, and is considered to be a key instrument in the fight against tax evasion. Given that the Directive contained a number of ‘loopholes’, the European Commission presented a revised version last year.

Yet Luxembourg and Austria rejected the Commission’s latest plans. Austria’s Finance Minister Maria Fekter challenged the European Commission’s motives, insisting that it is merely endeavouring to abolish banking secrecy and to ensure an automatic exchange of data, rather than to include third states.

15d May 2012 EU Tax Commissioner slams Luxembourg and Austria

EU commission release press statement

BRUSSELS (Dow Jones)--The European Commission's head of tax slammed Austria and Luxembourg's refusal to let it negotiate savings tax agreements for the European Union as a whole following the finance ministers' meeting here Tuesday.

"The position that Austria and Luxembourg have taken on this issue is grossly unfair," EU Tax Commissioner Algirdas Semeta told reporters. "They are hindering 25 willing member states from improving tax compliance and finding additional sources of income."

He added that he's "extremely frustrated" that ministers couldn't agree on a mandate for the commission to negotiate new and stronger savings tax agreements with Switzerland and other countries.

"This proposal has been on the table for almost a year now," Semeta said. "During the same year, law-abiding citizens have been bearing the brunt of austerity so that budget shortfalls can be met...Tackling tax evasion is a growth-friendly way of boosting national budgets."

The matter hinges on the EU-wide 'Savings Directive', a set of rules tackling tax evasion, among other issues. The commission has been scrutinizing bilateral agreements between Switzerland and various EU member states. Germany, and now the U.K., have had to revise their accords to tackle EU concerns that they made too many concessions to Switzerland, undermining the efforts for stricter rules at an EU level; the commission would like to handle negotiations for all 27 members.

Luxembourg can't agree to let the European Commission negotiate savings tax arrangements with non-European Union countries until there's more clarity on details of its mandate, Finance Minister Luc Frieden said.

"We're not blindly blocking a debate on this," Frieden told reporters after the EU finance ministers' meeting here. "But you don't let someone negotiate on your behalf without clearly knowing what the mandate involves."

Luxembourg and Austria aren't keen on handing over more powers to the commission, with Frieden saying inappropriate rules are pushing capital out of Europe. Automatic exchange of data about savings accounts in particular is a sticking point.

"If you don't have a level playing field, and there are financial hubs which offer better data protection, financial flows will go there," he said, saying that authorities already have sufficient access to data since a 2009 overhaul of banking secrecy rules.

Austrian Finance Minister Maria Fekter said she had "fought tooth and nail" to protect Austria's cherished banking secrecy laws.

She ruled out the possibility of allowing banks outside Austria the possibility of accessing the "private data of Austrian savers," and allow institutions to circulate this information.

"We made clear to the commission, that if it's a question of lifting our banking secrecy [rules] and introduce automatic exchange of information, then we cannot grant them a negotiating mandate," she added.

Semeta said the two countries' resistance against merely opening negotiations is "completely unjustifiable."

Austria and Luxembourg have "every assurance" that nothing will be signed without their full consent, he added.

15c May 2012 Luxembourg vetoes mandate

BRUSSELS (Dow Jones)--Luxembourg can't agree to let the European Commission negotiate savings tax arrangements with non-European Union countries until there's more clarity on details of its mandate, Finance Minister Luc Frieden said Tuesday.

"We're not blindly blocking a debate on this," Frieden told reporters after the EU finance ministers' meeting here. "But you don't let someone negotiate on your behalf without clearly knowing what the mandate involves."

The matter hinges on the EU-wide Savings Directive, a set of rules tackling tax evasion, among other issues. The commission has been scrutinizing bilateral agreements between Switzerland and various EU member states. Germany, and now the U.K., have had to revise their accords to tackle EU concerns that they made too many concessions to Switzerland, undermining the efforts for stricter rules at an EU level; the commission would like to handle negotiations for all 27 members.

Luxembourg and Austria aren't keen on handing over more powers to the commission, with Frieden saying inappropriate rules are pushing capital out of Europe. Automatic exchange of data about savings accounts in particular is a sticking point.

"If you don't have a level playing field, and there are financial hubs which offer better data protection, financial flows will go there," he said, saying that authorities already have sufficient access to data since a 2009 overhaul of banking secrecy rules.

He also said it was unfair to Luxembourg that there "hadn't been a proper debate." Citing the 21-hour negotiations on new rules on bank capital following the U.K.'s objections, he said "I don't accept that my country should be treated any differently."

He also confirmed that European Bank for Reconstruction and Development shareholders will vote on the organization's incoming president when they meet in London Friday and Saturday. EU ministers didn't offer their support to a single candidate.

"There are several excellent candidates," he said, adding that it was a shame EU ministers hadn't agreed to give their backing to a single person, thus splitting the bloc's voting power. "I would have preferred for us to reach a decision on this today, but that wasn't the case," Frieden said.

15b May 2012 Austria refuses to retract veto.

The European Commission today pledged to step up its fight against an estimated 1 trillion euros ($1.28 trillion) in tax evasion.

European Tax Commissioner Algirdas Semeta later this year will offer new proposals to combat tax havens and “aggressive tax planning,” so that nations don’t lose revenue to unfair investment strategies, the EU said in a document distributed to reporters in Brussels today. The commission, the European Union’s regulatory arm, will also seek to limit opportunities to exploit loopholes among national tax rules.

EU finance ministers are meeting in Brussels today and will discuss whether to give the commission room to negotiate tax agreements with Switzerland, San Marino, Liechtenstein, Monaco and Andorra. In 2010, EU nations collected about 330 million euros in savings tax withholdings from Switzerland, according to the commission document.

“It is expected that a revised EU-Swiss agreement, with a broader scope and stronger provisions, could deliver a substantially higher figure,” the commission said. “It’s difficult to estimate a precise figure at this point, given the intransparent nature of tax evasion, but member states would certainly benefit from considerable new revenue.”

Austria and Luxembourg have opposed the commission’s negotiating mandate, citing concerns that such a move would threaten their current policies. Austria won’t bow to pressure to loosen its banking secrecy rules as part of a Europe-wide interest taxation plan, Finance Minister Maria Fekter said.

“I’m besieged from all sides and you know me: I will stand my ground,” Fekter told reporters before a meeting of European Union finance ministers in Brussels today.

15 May 2012 EU Commission issues a Frequent Asked Question
14 May 2012 Maximum pressure on Luxembourg and Austria

Taxation Commissioner Algirdas Semeta makes no secret of his irritation with Luxembourg and Austria, which are more than likely to oppose any compromise on savings taxation at the 15 May Ecofin Council.

The Danish EU Presidency hopes at this meeting to hammer out a compromise on a mandate for the European Commission to renegotiate the Union's agreements on savings taxation with Switzerland, Liechtenstein, Andorra, San Marino and Monaco ). The aim is not only to extend the scope of the agreements to new products (life insurance contracts, etc) and to certain intermediaries (trusts, foundations, etc) so that they remain "equivalent" to the expected evolution of the EU's savings taxation directive, but also to adapt them to certain "recent international developments" in the area of information exchange between tax administrations. Roughly, the Commission wants Berne, Vaduz, Andorra, San Marino and Monaco to apply criteria "as close as possible" to the EU's – automatic information exchange – for 25 countries.

Luxembourg and Austria demand that, before opening talks on this basis with Switzerland, the 27 redefine the conditions under which the two member states will have to switch from withholding at the source to automatic information exchange. They wish to be on a strictly equal footing with Berne. If no progress is made on 15 May, despite the intense pressure being put on Luxembourg and Vienna, the subject is likely to be discussed at the European Council, on 28-29 June.

In March, the heads of state and government of the 27 member states found that "the negotiating directives for savings taxation agreements with third countries should be rapidly adopted".

The Council and Commission were asked at the time to "report regularly on the state of play in this field, starting in June 2012".

Interview with Commissioner Algirdas Semeta

What do you think of the attitude of Luxembourg and Austria?
It is incomprehensible. We are only at the beginning of the process. It puts them under no obligation to give the green light for opening negotiations with certain countries, including Switzerland. Once the talks have been concluded, the Commission will in any case have to submit the results to the 27 for their approval and the states will have to act unanimously. So, in short, if Luxembourg and Austria are not satisfied, they can say so then.

Luxembourg and Vienna want to delete in these mandates all references to the "recent international developments". What does that mean?
It is up to these two states to explain why such a reference creates a problem for them. There would have to be a very good reason to delete it, because I don't see what could possibly still justify holding up the mandates.

You seem angry…
It's because savings taxation is not just the business of Luxembourg and Austria alone. Take Greece, for example, which is in serious financial difficulty: it is losing a lot of money because of this stalemate. We are asking taxpayers to make major financial efforts to reduce the impact of the crisis and at the same time states are not being permitted to increase their revenues by recovering part of the funds deposited in certain countries like Switzerland. It's absurd.

But isn't Greece trying to circumvent the barrier by negotiating a Rubik bilateral agreement with Switzerland?
It is negotiating, yes, but within the limits we have set, which have been accepted by Germany and the United Kingdom. There is no question of including elements that concern savings taxation in the agreement: the Union alone has competence in this area. And savings taxation represents the largest part of the financial stakes.

To cajole Luxembourg and Vienna, shouldn't the goal of general use of automatic information exchange in the EU be set aside?
In 2009, the Swedish EU Presidency proposed to set a cut-off date for the end of the transitional period, in 2014. That idea was not supported.

Could another possible solution be to ask Switzerland, which has already had to chip away at its banking secrecy in recent years under outside pressure, to switch to the automatic exchange system, if only after a transitional period?
Obviously, we cannot prejudge the outcome of the negotiations that we would like to hold with Switzerland. But the Swiss are very good negotiators and we know that under the European savings taxation directive they are supposed to apply measures equivalent to those in force in the EU, not identical measures.
12 May 2012 Back to drawing board for Danish Presidency
In spite of the differences of opinion that continue to exist between member states, the Danish EU Presidency decided, on 10 May, to put the issue of savings taxation back before the 27 finance ministers, who will meet on 15 May. It may well be doing so to no avail.

Officially, Copenhagen hopes to see the ministers agree to give the European Commission a mandate to renegotiate the Union's 2004 agreements on savings taxation with Switzerland, Liechtenstein, Andorra, San Marino and Monaco. The subject "will not be very high on the agenda of the following Presidencies," since Cyprus and Ireland have never been strong proponents of tax harmonisation in Europe, observed a diplomat.

However, he added, "I don't think that we will go beyond relaunching the issue on 15 May" due to the continuing opposition of Luxembourg and Austria to any advances. Some do not rule out the possibility of the subject being addressed by the heads of state or government, on 28 or 29 June. It was at this level that a compromise was finally worked out, in June 2000, on the Union's first 'tax package'.

Luxembourg and Austria repeated, at a 10 May meeting of the Committee of Permanent Representatives (Coreper), that the draft negotiating brief presented by the Danish Presidency still does not meet their expectations. Vienna seems to be remaining insensitive to the pressure being put on it by the European Commission, which has not yet issued its verdict on the Rubik bilateral agreement concluded by Austria and Switzerland in April.

Luxembourg and Austria reject a reference in the draft negotiating directives to "recent international developments," which according to Copenhagen, Paris, Berlin, Rome and London must absolutely be "taken into account" in the talks with Switzerland. The Presidency notes that Berne has made many concessions to the United States (in the wake of the UBS case) and to Germany and the United Kingdom (in the Rubik agreements they have concluded) on the exchange of tax data on request. It demands that Switzerland extend these benefits to all EU member states.

Luxembourg and Vienna are concerned that a new agreement with Switzerland concluded on this basis may hasten the end of the transitional period that currently enables them to apply withholding at the source and thereby to preserve their banking secrecy, rather than having to apply automatic exchange of information between tax administrations. Under the existing Directive 2003/48/EC on savings taxation, they will have to make the switch once agreements on information exchange with Berne, Vaduz, Andorra, San Marino and Monaco have been approved.

Luxembourg and Austria demand to be placed on the same footing as Switzerland in order to protect themselves against capital flight. Their partners, who ask only that Switzerland apply "equivalent"– not identical – measures, do not seem willing to accept this demand: "Calling into question the end of the transitional period will unravel what we have already achieved. It is not a compromise option," commented a diplomatic source.

Not yet, at least, because it is recognised that the Union has the obligation to achieve a given result on combating fraud and tax evasion: "The current situation is harmful to everyone." On the one hand, "the Union is projecting a poor image to the rest of the world by showing itself incapable of solving its own tax evasion problems" even as it harangues tax havens of all kinds. On the other, "it cannot deprive itself of an important instrument to combat evasion" because its member states urgently need to bring in more tax revenues. There is also "a moral problem: fraudsters are exonerated from making any effort" while honest taxpayers are bearing a large burden to help reduce the impact of the economic and financial crisis.

11 May2012 EU Savings Tax Amendments impact on Rubik
Rubik is forced to yield tax on interest to EU Savings Tax Directive (EUSD). The EUSD amendments are radically different to Rubik. The critical difference is management of entities and arrangements take over the Paying Agent function. An equally disruptive disparity is the definition of beneficial owner. Also capital gains are often defined as interest. This means (i) Rubik’s loopholes will be closed, viz. discretionary trusts & foundations, foreign insurance and untaxed commercial entities, (ii) Capital gains will often be subject to the higher interest tax rates, (iii) Accounts everywhere in the world managed from Switzerland will be in scope. The 2nd EUSD review will bring accounts in Singapore, Bahamas, etc., into scope if paid by a Permanent Establishment (branch)

Paying Agent

  • Bank remains Paying Agent if interest is channeled to another bank outside the territory, and is aware of the eventual recipient
  • A killer for Swiss Banks is it must report payments to entities and arrangements managed in another country within territory or withhold 35%, irrespective of residence of beneficiary

Paying Agent Upon Receipt
  • Management of untaxed entity or arrangement within territory becomes Paying Agent Upon Receipt

Beneficial Owner
  • If determined by the Paying Agent
    1. Recipient of payment to bank outside territory
    2. For entities and arrangements managed outside the territory, the immediate beneficiaries such as shareholders or who exercise control over management

  • If determined by Paying Agent Upon Receipt
    1. Immediate beneficiaries, such as shareholders or who exercise control over management. If unidentifiable, then...
    2. Individual who initially, directly or indirectly contributed assets that gave rise to the interest. If unidentifiable, then...
    3. Individual who within 10 years becomes entitled to the interest, or assets producing interest or other assets representing such

  • Interest substitutes are any security which guarantees at least 95% return of capital or provides income linked to 95% interest
  • All collective investments, irrespective of legal form or sales restriction
  • Life insurance benefit, if actual performance is linked to more than 25% interest. Entire benefit is deemed interest. Fixed annuities and pensions paid over at least five years remain exempt
Shock effects:
  • Swiss bank must withhold tax on payments to entities and arrangements managed in another territory, or report the payment, even if beneficiary is non-EU resident
  • Settlor is deemed beneficial owner even if has no revocable rights to income nor influence over management
  • Capital gains on guaranteed structured products deemed interest
  • Capital gains of affected life insurance and pensions are deemed interest
  • Swiss trustees of accounts in Bahamas or Singapore in scope
  • Derivatives linked to interest in scope viz. interest and currency swaps, floored floaters, forward rate agreements, swaptions and interest futures
  • Swiss relationship managers regarded as Paying Agents Upon Receipt if has a discretionary agreement on Singapore bank account

2nd review in progress
Every three years the directive is reviewed. The 2nd amendment may consider:
  • Deeming settlors as beneficial owner for out of territory entities and arrangement
  • Permanent Establishments (branches) of Swiss banks in Singapore or Bahamas must apply withholding tax, according to attribution of profits Article 7 OECD MC paid to non resident
  • Debt claim threshold of interest substitutes reduced to 25% matching insurance and funds.
  • Taxable entities with accounts in Switzerland without commercial justification
  • Entities & legal arrangements funding loans from sales of debt claims
  • Products grandfathered exemption capped to ten years
  • Funds below 25% debt claim threshold will be Paying Agents Upon Receipt or subject to look through by Paying Agent
10 May2012 Italy now negotiating a Rubik deal.

Bern and Rome return to negotiating table
Switzerland says neighbouring Italy has agreed to resume negotiations on a comprehensive fiscal accord, including a crackdown on tax cheats.

Widmer-Schlumpf said negotiations would cover a broad range of fiscal issues, including a withholding tax.nThe announcement about negotiations with Italy comes in the wake of tax agreements with Germany, Britain and Austria earlier this year. These deals still need approval by the respective parliaments.

Right moment

Widmer-Schlumpf said a number of factors helped break the impasse with Italy.

She mentioned numerous talks at a diplomatic level since September, the willingness of the Ticino cantonal government to settle a dispute over SFr28 million in frozen income tax of Italian workers as well as pressure by local Italian authorities on the central government in Rome.

Widmer-Schlumpf added that approval in principle by the European Union for bilateral tax deals between Switzerland and Germany, Britain and Austria may have had an impact on Italy’s policy change.

9 May2012 Italy’s Monti opens door to bilateral tax treaty.

Italian Prime Minister Mario Monti has signaled willingness to open negotiations with Bern for a bilateral tax treaty similar to those agreed between Switzerland and Germany, Britain and Austria.

However Monti qualified his remarks by saying that an agreement would only be possible once the Swiss canton of Ticino agreed to lift a freeze on the tax-at-source revenues of cross-border workers that would normally go to Italy.

Ticino imposed the freeze last June as a way of pressuring the Swiss government to renegotiate the existing agreement with Italy governing taxation of cross-border workers. The canton was also angry that Italy had maintained Switzerland on its blacklist of tax havens, making it harder for Swiss firms to do business in Italy.

Monti said “if there are positive signals” from Ticino that it was ready to lift its freeze on Italian workers’ taxes, he was prepared to “reconsider the entire matter” of a bilateral tax treaty with Switzerland.

The comments represent a change in position for Monti, who has previously refused to entertain the prospect of a bilateral tax treaty with Switzerland. However in recent days he has come under increasing pressure from most Italian political parties who wish to open negotiations with Switzerland.

A spokesperson for the State Secretariat for International Financial Matters said Swiss authorities were in contact with their Italian counterparts.

21 Apr 2012 British win more favourable tax deal.
Switzerland has decided to give in to demands by Britain to modify a planned bilateral tax treaty, after continued opposition to the accord.

The finance ministry on Friday said both sides agreed to raise the minimum rate to legalise untaxed assets from 19 per cent and 34 per cent to between 21 per cent and 41 per cent, similar to a deal between Switzerland and Germany.

The agreements still need approval by all the country’s parliaments in order to come into force next January.

The British authorities had asked the Swiss to review the first version of the so-called Rubik accord, initially agreed in October 2011, which regulates the taxation of British assets managed by Swiss banks.

They argued the “most-favoured nation” clause written into the deal should secure them similar concessions to those obtained by Germany. In exchange for cloaking the identity of offshore account holders, the Rubik deal promises to pay compensation for past tax dodging and compel banks to cream off a withholding tax on the future profits of client assets.

At the beginning of April Switzerland agreed to revise upwards the tax rate – initially agreed in September 2011 - applied to German nationals’ assets held in Swiss banks.

A lump sum tax payable on deposited capital will be taken by the banks and transferred anonymously to tax authorities in Germany at a rate varying between 21 and 44 per cent rather than the 19 and 34 per cent range initially planned.

Meanwhile, a withholding tax for capital gains remains the same - 26.4 per cent for Germany and 27 per cent for Britain - and 48 per cent for other British income. Berlin also managed to get the mention of “reciprocal access to markets” deleted. The German authorities will be able to make 1,300 requests for information on their citizens holding Swiss bank accounts instead of the 999 planned in the first version of their accord.


John Christensen, director of the non-governmental group Tax Justice Network, also described the proposed deal as “full of flaws” and said the British government’s hopes of raising £5-7 billion a year were “completely exaggerated”.

British account holders who have hidden money abroad "will continue to evade taxes, making use of trusts, insurance schemes and foundations, as these structures make it impossible to identify the real holder of the assets", said Christensen.

The deal’s entry into force 18 months after it was agreed upon has also given tax dodgers “ample time to move their money to another financial centre or foreign branch of a Swiss bank”, he added.

The Rubik treaty foresees that before January 2013 Switzerland will have communicated to the British authorities the top ten destinations for account holders’ assets as well as amounts transferred and the number of clients.

20 Apr 2012 Taxation: Switzerland a difficult partner? Savings Taxation: Bern’s yes, but...

European Commission President José Manuel Barroso commented after a meeting with Swiss Confederation President Eveline Widmer-Schlumpf, on 20 March in Brussels:

European Commission President José Manuel Barroso commented after a meeting with Swiss Confederation President Eveline Widmer-Schlumpf, on 20 March in Brussels: “For the European Union, it is essential to take a step forward [with Berne], particularly on savings taxation”.

The touchiness of this subject on both sides is well known.

The Union would like to extend the scope of its directive, limited for now to interest income earned by non-residents, to legal structures and additional products. However, a final decision is not likely to be taken until Switzerland agrees to apply ‘equivalent measures’ and to adapt accordingly the savings taxation agreement it concluded with the EU in 2005.

The Commission submitted to the Council, in July 2011, a draft mandate for negotiations with Switzerland, but it has not been adopted yet due to the opposition of Luxembourg and Austria. These two states demand to be placed on the same footing as Berne. They refuse to be obliged to switch from the system of withholding at source, which enables them to preserve their banking secrecy, to the automatic exchange of information between tax administrations, unless Switzerland has to do the same.

Switzerland will not take that step. Widmer-Schlumpf reiterated, on 20 March, that she is “available” to renegotiate the agreement with the EU, but on Switzerland’s terms: there is no question of abolishing banking secrecy or making concessions to the Union on savings taxation without obtaining trade-offs in other sectors, in the name of the “comprehensive and coordinated approach” to relations with the EU taken by Widmer-Schlumpf.

How can the EU demand this sacrifice of Berne, considering that three member states, Germany, the United Kingdom and Austria, concluded bilateral agreements with Switzerland? Under these ‘Rubik agreements’, Switzerland will deduct at the source a tax in full discharge of all tax liability on different types of income. The agreements will also protect the sacrosanct ‘private sphere’ of German and British savers.

This is the principle, in any event, but in fact Swiss banking secrecy is being chiselled away elsewhere as well. Berne has made concessions on providing grouped information on presumed fraudsters, at the request of authorities, which has not escaped the notice of the Danish EU Presidency. Copenhagen suggests that Switzerland extend to the 27 the concessions it has made to Berlin and London – as well as the much more important concessions it has made to the United States.

On 20 March, Widmer-Schlumpf did not rule out this possibility. In any case, she said she was willing to negotiate a “framework agreement” with the EU on Rubik, which would set parameters for the bilateral agreements that Switzerland plans to conclude with other countries, Greece among them. The principle of withholding at source would of course represent the first of these parameters. Back to square one.

Swiss secrecy tick tock

19 Apr 2012 EU states “running out of patience” with Bern
The EU Commissioner answers questions on Swiss Rubik agreements.

Taxation Commissioner Algirdas Semeta has agreed to answer Europolitics’ questions in writing.

What are the Commission’s priorities in the area of taxation as regards Switzerland?

There are two key areas on which we need to make progress quickly. They are the code of conduct on business taxation, and work in the area of savings taxation.

The EU has a long-established policy of fighting harmful tax competition, both in the EU and in relation to third countries. Our code of conduct for business taxation sets out the principles and criteria to ensure fair business taxation and remove harmful practices.

In June 2010, member states asked the Commission to start bilateral dialogues with third countries as part of the work to promote the principles of the code with third-country partners. Priority was given to Switzerland and Lichtenstein, taking into account their geographic location, integration in the internal market and concerns about their company tax regimes. Member states have said that they expect to see satisfactory progress in this dialogue before the end of June, so there is clearly some pressure to move these talks forward.

As regards the taxation of savings, the current economic crisis has thrown into the spotlight the need for stronger provisions to ensure that all member states can collect the taxes that they are legitimately due. To this end, the Commission has not only proposed reinforcing the EU’s own instruments (notably by revising the Savings Directive), but also to re-look at our arrangements with key neighbouring countries, not least Switzerland. We have asked Council for a mandate to negotiate a stronger EU-Swiss savings agreement. As soon as we get this mandate – which I am optimistic will be before the end of the Danish Presidency – we will rapidly startnegotiations.

Is Switzerland an easy partner for the EU in this sector?

Switzerland is an important partner, given the intensity of its economic relations with the EU. Obviously, in EU-Swiss discussions, both parties have their own particular interests in mind, and its no secret that our viewpoints on tax matters do diverge from time to time. But we try to ensure that discussions are frank, professional and constructive.

In this context, what assessment do you make of your meeting, on 20 March, with Swiss President Eveline Widmer-Schlumpf? Did you deliver any particular messages?

My meeting with President Widmer-Schlumpf was a welcome opportunity to exchange views on important tax matters in EU-Swiss relations. On my side, I took the opportunity to confirm with the president that Switzerland would be ready to engage as soon as the Commission is authorised to negotiate an improved and extended savings agreement.

I also explained to President Widmer-Schlumf that we cannot lose any more time on the code of conduct discussions. We urgently need to start the dialogue on company tax issues and we need to produce results. I believe that this message was well understood.

Switzerland will refuse to start discussing savings taxation and business taxation until it can obtain a guarantee that its Rubik agreements with the United Kingdom and Germany will be applied. Isn’t this blackmail?

President Widmer-Schlumpf has assured me that Switzerland is willing to discuss a new savings agreement when the EU is ready. As soon as the Commission gets the mandate, I am sure that our negotiations will get underway rapidly.

With regard to the code of conduct, even before these bilateral agreements you refer to existed, the dialogue with Switzerland was not easy. Despite what could be seen as exaggerated delay tactics on the part of the Swiss, member states have been very patient and even accepted Swiss requests concerning the scope of the dialogue. But I fear this patience is now running out. If Switzerland does not seriously engage in this dialogue and allow us to show real progress by the end of the Danish Presidency, member states are likely to resort to other methods of tackling what they perceive to be unfair company tax regimes in Switzerland.

What is the Commission’s position on these Rubik agreements?

The Commission’s position on the bilateral agreements that Germany and the UK signed with Switzerland has been extremely clear. The German and UK agreements, in their original form, gave rise to concern. As we explained to these member states, they breached the exclusive competence of the EU in the field of international savings tax and overlapped with areas that are already covered at EU level. I don’t question the competence of member states to enter into bilateral agreements with Switzerland. But these agreements must not include any aspects which impinge on areas of common EU action. This message was unequivocal in the letter I sent to the Danish Presidency and EU finance ministers, on 5 March.

Germany and the UK have reacted positively and worked to address our concerns by proposing amendments to their agreements. Indeed, the UK agreement has already been formally amended and Germany is working to revise its own. The Commission will look closely at the changes, as well as any future agreements that member states might sign with Switzerland to ensure compliance with EU law.

Switzerland proposes to conclude a framework agreement with the Union on Rubik. What are your views on that?

As I have already said, the Commission aims to negotiate a stronger and better EU-Swiss savings agreement as soon as it is given the green light by member states. I don’t want to speculate on what Switzerland might propose within these negotiations when that time comes. The objectives of the Commission are well known. We have identified the amendments that need to be made to the EU Savings Directive in order to strengthen it and close its loopholes, and we want to achieve equivalent amendments to the EU-Swiss savings agreement.

Once we can commence the negotiations, we will engage with ambition and openness. But we will also have our red lines. The EU is not prepared to back-track on good governance, nor will we accept bank secrecy that can support tax evasion. I remain convinced that automatic exchange of information is the best means of ensuring effective taxation of savings income, and we will push for at least equivalent measures from our international partners. Our negotiations with Switzerland will aim at securing the best deal possible, consistent with these principles.

18 Apr 2012 EU Parliament and EU Commission seem intent at all costs on imposing automatic exchange of information within the EU.
Copenhagen and Commission determined to boost fight against fraud
Wednesday 18 April 2012

The European Commission and the Danish EU Council Presidency have not remained deaf to the European Parliament’s “call for concrete ways to combat tax fraud and tax evasion”: they have agreed to redouble their efforts to break the stalemate on the savings taxation debate.

MEPs will vote, on 19 April, on a resolution calling for an end to banking secrecy in the EU and early agreement with Switzerland on revision of the 2004 savings taxation agreement between this country and the Union.

On 18 April, the European Parliament debated the issue. Before the debate got under way, however, S&D group leader set the tone at a press conference: “The time has come to inject a taxation dimension into the Union’s debate” in order to refill the coffers of crisis-plagued member states. “There is a lot of money in bank accounts in Switzerland and in other tax havens. We have to react,” he exclaimed, urging the 27 member states to put up a “united front” against Bern, rather than negotiating individual ‘Rubik agreements’ with it.

Taxation Commissioner Algirdas Semeta followed suit: “The Council’s progress on Commission proposals is too slow. The 27 finance ministers have to find a way to break this overly long stalemate” on the update of EU rules on savings taxation.

This is obviously easier said than done, since Luxembourg and Austria still refuse to give the Commission a mandate to renegotiate the agreement with Bern.

Danish European Affairs Minister representing the Presidency, said the matter would nevertheless be put before the 27 finance ministers, “I hope on 15 May,” otherwise on 22 June. Copenhagen makes no secrecy of its intentions: it plans to demand that Switzerland make the same concessions to the 27 that it has made to the United States, Germany and the United Kingdom on information exchange between tax administrations on request.

Now that UK and Austria have signed a Rubik agreement with Switzerland, it seems ludicrous that the EU Commission and Council is still linking the issue of automatic exchange of information with the technical improvements of the EU savings tax.

As Rubik was approved by the EU Commission as being legal, then two EU Member States have officially recognised withholding tax is a substitute for automatic exchange of information in finalising their tax payers obligations. Therefore there is absolutely no chance that Luxembourg will agree to automatic exchange of information if Switzerland maintains its banking secrecy and that some EU Member States accept withholding tax as the solution over automatic exchange. As long as the secrecy issue is linked to the EU savings tax amendments, LU and AT will veto any progress on either proposal.

The only solution to progress is for the EU Commission to postpone the transitional period (modify Article 10 if need be) and try get just the technical improvements of the EU savings tax directive amended. I am aware that Article 10 of the EUSD regarding the end of transitional period occurs when the 5 third party countries agree to exchange on demand. But in reality, LU never envisaged that the 5 countries would agree to exchange info on demand and hence approved Article 10. Furthermore, LU would most likely agree to automatic exchange if Switzerland did the same. However, now that some EU Member states have permanently cemented withholding tax in lieu of automatic exchange with Switzerland, and there is no hope Swiss would now agree on automatic exchange, there in no chance LU would agree to automatic exchange.

Therefore for the EU Commission to continue link automatic exchange and the EUSD amendments, means LU will veto amendments until the cows come home.

17 Apr 2012 EU Parliament adopts a resolution calling for tightening up EU rules on savings taxation without delay.

Against the backdrop of the economic crisis, the fight against tax evasion is taking on growing importance in the EU. The European Parliament will debate the subject, on 18 April, before adopting a resolution the following day calling for tightening up EU rules on savings taxation without delay.

The S&D group is behind the debate and vote on this resolution, following its study on tax fraud, published on 29 March (see Europolitics 4375).

The study by Richard Murphy, director of Tax Research UK, estimates that some €1,000 billion per year in tax revenues are lost in the 27 member states due to tax evasion and tax avoidance - the use of abusive strategies to minimise taxation due. On releasing the study, the S&D urged EU leaders to halve tax evasion by 2020, noting that this financial gulf strains member state finances and "affects public investments, growth and employment".

"Combating tax evasion should be a key priority for the Union. A lot has been said but little has been done so far," S&D group leader Hannes Swoboda (Austria) said in a statement, released on 16 April. "In their effort to reduce budget deficits, EU governments have mainly focused on cutting spending. Now they should act on increasing their tax revenues. Paying taxes is a basic civic duty. Everyone should contribute to the cost of the crisis. It is a matter of social justice," adds the group spokeswoman, Elisa Ferreira (Portugal). Fifteen priorities

The joint draft resolution being discussed by the different political groups, 'Call for concrete ways to combat tax fraud and tax evasion', identifies 15 priorities.

The text highlights the need for widespread application of automatic information exchange between tax administrations in order "to end banking secrecy".

The EU's Savings Taxation Directive should be revised and an "early agreement" reached with Switzerland, it continues, noting that "in general," the member states should refrain from working out bilateral arrangements with third countries, a reference to the Rubik agreements signed by Germany, the United Kingdom and Austria with Berne. More broadly, "a complete strategy against tax havens should be developed on the basis of strict EU criteria".

Unless the issue of automatic exchange of information is separated from the technical improvements of the savings tax directive, LU and AT will continue to veto the EUSD amendments proposal.
13 Apr 2012 The EU Commission has welcomed the UK-Swiss tax agreement because it omits interest, leaving it within the scope of the EU savings tax directive and its future amendments.

The the EU Commissioner, Semeta, re-iterated his support for the tax treaties because they omitted interest which is under the jurisdiction of teh EU savings tax and its future amendments.

The European Commission welcomed Friday the revision of a draft accord between the U.K. and Switzerland that outlines how the British government will tax deposits of its citizens in Swiss bank accounts while allowing them to maintain their anonymity.

The commission has been scrutinizing bilateral agreements between Switzerland and European Union countries to ensure that they don't undermine the EU-wide Savings Directive, a set of rules tackling tax evasion, among other issues.

Austria and Greece are preparing such agreements with Switzerland, and the commission is already reviewing the Austrian draft.

Germany, and now the U.K., have had to revise their accords to tackle EU concerns that they made too many concessions to Switzerland, undermining the effort for stricter rules on an EU level. The bilaterial agreements aim to tap fresh tax revenues while preserving the secrecy of the Swiss banking sector, which makes it so popular with wealthy individuals.

A spokeswoman for the EU's executive arm said Friday that "at the moment the U.K. are making changes to their agreement and we're very pleased, it's a positive development." She added that it was up to the European Commissioner in charge of tax policy, Algirdas Semeta, to give the bilateral accord the final green light on behalf of the commission.

Austria has also signed a Rubik agreement with Switzerland, which is being reviewed by EU commission to ensure it does not clash with the EU savings tax dirctive.
Now that several EU Member States accept withholding tax instead of automatic exchange of information, it is expected the EU Council or EU Commission will separate the issue of AEI from the proposed technical revision of the EUSD.

Luxembourg will never agree to AEI now that UK, etc accept withholding tax in lieu of AEI from Switzerland. Therefore the EU Commission should postpone Clause 10 of the EU savings tax, which ends the transition period for withholding amongst EU Member States once Switzerland agrees to exchange on demand. It was the linking of AEI and technical improvements that has held up the EUSD amendments for 4 years.

7 Apr 2012 A major amendment to the Rubik agreement with Germany is the 50% levy on bank accounts inherited.

Fortunately for most, this tax will never apply due to Rubik's loopholes.

Swiss hole dyke
Can anyone tell me how inheritance clause will apply to accounts held in a fiduciary structure which does not have identifiable beneficiaries. I assume 75% of all accounts in Switzerland are held in the name of an entity or legal arrangement where it will be impossible forth e bank to identify when a beneficiary inherits the assets. This will only be known by the trustee or foundation council or managers of the company. Nothing will change.

For example, a settlor has set up a discretionary trust. The settlor dies. The account still goes on as before. The bank is not informed the settlor is deceased. The bank is not informed the the new beneficiaries as its up to the settlor to decide in his own time who gets paid and how. Eventually in a few years, the trust makes a distribution to the heirs in the form of say consulting fee, which is not in scope of the Rubik. This way, there is no capital regularisation levy, no inheritance tax nor any income tax,nor tax on distribution.

Rubik is pathetic weak legislation which does not pierce the most basic of fiduciary arrangements.

6 Apr 2012 The key to Swiss agreeing to the EU Commission demand that Rubik agreement omit interest, is that the agreeing Member State deem the EU saving withholding tax be full & final settlement, i.e. fulfills taxpayers obligations. Clearly this is to prevent future demands of exchange of information by the EU via any EUSD amendments. Foreword 8 of the EU Savings tax directive of 2003 says The ultimate aim of this Directive is to enable savings income in the form of interest payments made in one Member State to beneficial owners who are individuals resident in another Member State to be made subject to effective taxation in accordance with the laws of the latter Member State.

However, foreword 9 says the ultimate aim of bringing about effective taxation of interest payments in the beneficial owner's Member State of residence for tax purposes can be achieved through the exchange of information concerning interest payments between Member States.

Will the EU Commission hold foreword 13 against Germany and UK finalizing withholding tax instead of automatic exchange of information.

5 Apr 2012 Swiss sign Rubik agreement amendments with Germany and ups the maximum past capital levy to 41%. Although it is still unlikely to pass approval in German upper house of Parliament, until the capital levy is 50%. Also there is little to prevent banks assisting clients to move to their Singapore branches. The most significant change, seems to be a mere side note, is that Rubik cannot touch interest and must leave it to the EU savings tax. Rubik being forced to omit interest and leave it to the EU savings tax is a major defeat for Switzerland. The EUSD amendments close all Rubik's loopholes (such as trusts, foundations, untaxed commercial entities, etc.) as well as the definition of interest under EUSD will expand to include capital gains and dividends of funds, insurance policies etc. In effect, Rubik will eventually be a hollow shell with virtually no income under its scope. Furthermore, the EC will still place pressure on Switzerland to exchange info via the EUSD.
1 Apr 2012 Swiss justice issues arrest warrants for German opposition tax officials for buying Credit Suisse CD data.

Germans political parties react with unlimited outrage and disgust, reported in over 1,000 German newspapers on Sunday.

This is the Swiss ultimate shooting themselves in their foot. There is now no chance that German opposition will accept the Rubik agreement. It brings Swiss banking secrecy to the forefront.

Swiss shot foot

30 Mar 2012 Tax evasion deal with Germany remains stalled. The German political party fight over Rubik's minimum withholding rate is a joke because whether 19% or 50% is the ultimate agreed withholding rates, no withholding will apply to the huge Rubik loopholes, viz no levy will be applied to vast majority of German held assets held being in trusts, foundations, anstalts, non Swiss insurance companies, commercial sham offshore companies, etc.

28 Mar 2012 The UK has passed domestic tax legislation which deems the EU savings tax withheld in Switzerland on interest as full & final settlement of tax payers obligations.

Is this in conflict with the EU savings tax directive and its future amendments?

EC admonish UK

The 2003 EU savings tax directive states in the foreword:-
  1. The ultimate aim of this Directive is to enable savings income in the form of interest payments made in one Member State to beneficial owners who are individuals resident in another Member State to be made subject to effective taxation in accordance with the laws of the latter Member State.
Therefore at first glance, it seems the UK may indeed be within its rights to regard the withholding taxes of the EU savings tax directive as discharging their tax payers' fiscal obligations in full.

However, the foreword also states:-

  1. The ultimate aim of bringing about effective taxation of interest payments in the beneficial owner's Member State of residence for tax purposes can be achieved through the exchange of information concerning interest payments between Member States.
So there are two grounds for the EU Commission to object to the UK-Swiss tax treaty...
  1. The EU Commission knows that if UK regards withheld tax as full and final settlement, this will result in Luxembourg and Austria demanding identical treatment, i.e. the permanent continuation of the transitional period viz. withholding instead of automatic exchange of information. The transitional period was always supposed to be temporary, but the UK-Swiss tax treaty makes withholding a permanent measure. This is obviously in conflict with the goal as stated in foreword 14.
  2. The EU Commission instructed the UK-Swiss tax treaty not to conflict with all future amendments to the EU savings tax directive. Even though the current EU savings tax agreements with Switzerland do not contain any aspect of automatic exchange of information, the EU Commission always left place for negotiations with Switzerland regarding automatic exchange of information in future EU savings tax revisions. However, the UK-Swiss tax treaty permanently closes all future amendments to the EU Savings Tax Directive regarding automatic exchange of information. The UK domestic law is clearly a major conflict of the EU savings tax directive goals.
27 Mar 2012
Austria wants to rush through a Rubik agreement with Switzerland, but Switzerland says Austria must first wait for Germany to agree to an agreement In the meantime, Switzerland is bending over backwards to accommodate Germany's opposition parties' demands for increased withholding rates.

21 Mar 2012 Swiss officials commenting on revised Rubik are ill informed if they think nothing has changed. Revised Rubik deal with UK a cause for temporary celebrations.

It is ignorant to state "The agreement remains unchanged in essence.".. Prior to Rubik omitting interest, it was solely up to Rubik to determine the beneficial owner and the paying agent. Rubik has such big loopholes in this regard that in essence it is a useless inefficient agreement. For instance Rubik exempts beneficiaries of discretionary trusts or tax haven companies which have a commercial purpose ( nudge nudge wink wink). Now however the withholding tax on interest is determined by the EUSD which will say, deem settlors of discretionary trusts or foundations as the beneficial owner and include all untaxed companies, even if it has a commercial purpose (nudge nudge wink wink).

Furthermore EUSD will deem all gains of insurance and structured products as interest, thereby increasing tax rate considerably compared to Rubik. Furthermore EUSD will catch Luxembourg / Irish insurance policies, which Rubik was useless in trying to affect. We won't even go into hoe Article 11.5 will affect Swiss banks making payments to entities and legal arrangements managed in the UK for non-UK residents (hint banking secrecy capiche).

Rubik fan

20 Mar 2012

20 Mar 2012 ii
Switzerland and the UK supplement withholding tax agreement.
Switzerland and the United Kingdom of Great Britain and Northern Ireland signed a Protocol of Amendment that supplements the withholding tax agreement of 6 October 2011. The agreement is thus ready for parliamentary deliberation. It should enter into force at the start of 2013.

The Protocol of Amendment to the withholding tax agreement was signed by Michael Ambuehl, State Secretary in the Federal Department of Finance, and Dave Hartnett, Permanent Secretary for Tax, HM Revenue & Customs. The agreement remains unchanged in essence. Interest payments will be excluded from the agreement's scope. At the same time, it will be ensured that UK taxpayers can discharge their tax liability on interest payments. Effectively, nothing will change for bank clients; their tax obligations will be fulfilled. Only the legal structure will change. The concerns of the EU Commission regarding compatibility with EU law have been removed. Inheritance is now also covered by the agreement in order to eliminate a loophole. In the case of inheritance, the heirs must consent to either collection of a tax or disclosure.

The agreement not only respects the protection of bank clients' privacy applicable in Switzerland but also ensures the implementation of the UK authorities' legitimate tax claims. In addition, mutual market access for financial services will be improved. The agreement requires the approval of parliament in both countries, and should enter into force at the start of 2013.

It remains to be seen how the EU Commission responds to the UK immortalizing withholding tax on interest as full & final settlement, which is an obvious conflict with the core principle of the EU savings tax.

Cricket not out

19 Mar 2012 No chance Swiss will agree with Germany to renegotiate Rubik to omit interest as that will sink the entire purpose of the agreement, i.e. guarantee secrecy forever. Germany could never get opposition to agree to pass the same legislation as UK to deem EUSD withholding tax as full & final settlement.

Germany wants to reopen talks with Switzerland on a deal to stop its citizens dodging taxes after opposition parties said it was too soft on tax evaders and threatened to block it, sources said.Bern said on Thursday it was ready to continue talking but did not want to change the core of the deal.

Rubik boat sink

19 Mar 2012 ii
Swiss secrecy sink

Swiss secrecy no hope