It all comes down to this, maybe: German tax deal vote

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In just a few hours German lawmakers in the chamber of states, the Bundesrat are expected to finally vote on a tax deal with Switzerland.  After much haggling, the Swiss and German governments agreed on terms for taxing German clients of Swiss banks with withholding taxes to preserve their anonymity, should they wish.  But as it’s election season, the German opposition has come on very strong to oppose the deal, saying tax cheats are getting off easy.  WRS’s Tony Ganzer brings us up to speed.

It could be said the German tax deal is the model for Switzerland’s hopes for its financial sector’s future.  The Swiss want to focus on just “clean money” to escape a reputation of being a tax haven. And the German deal, with similar deals with Austria, the UK, and maybe one day the U.S. is the path to cleaning up the past in the Swiss view.

KUNZ:

Peter Kunz is a professor of law at the University of Bern.  He says Switzerland gave up too much to the U.S. in tax negotiations, too early, but with Germany, well, the Swiss should stick with a tougher stance.

KUNZ:

And that is just what the Swiss have done, pledging it be this German tax deal, or none.  The German Social Democrats have led the charge against the deal, controlling the chamber of states, the Bundesrat, and able and willing to block a deal.  This week, German magazine Der Spiegel reported Chancellor Angela Merkel’s government was prepared to pump about 3 billion euros in expected revenue from the Swiss deal into the German states, in hopes of securing more support.  The federal government effectively is foregoing its share.  This added influence might help when the issue goes to a conciliation committee to square the outcomes from both houses of Parliament.  Social Democrat General Secretary Andrea Nahles said,

NAHLES (German): Now the federal government is apparently ready to put money on the table to push through a stopped-up tax deal with Switzerland. I have just one answer for that—without us. Without the Social Democrats.  This attempt will not work.  This tax deal has failed—it will not have a majority in the Bundesrat.

German officials rejected the magazine report as speculation, but the rhetoric was no less clear from ruling coalition partner the Liberal FDP.  Party head Patrick Döring told Swiss public television,

DÖRING (German): “For me it is not understandable, that the Social Democrat-led states are doing away with expected increased revenues, and continue with unclear legal bases, with data thefts.  They prefer to play politics instead of coming to an agreement.”

GRÜBEL:

Oswald Grübel is former CEO of UBS and Credit Suisse.  He told WRS earlier this year that the German tax deal had a 50-50 chance of passing, though he didn’t think it much matters…even for potential benefits for Swiss banks.

GRÜBEL:

The Swiss government this week reaffirmed its stance that plan B for a failed German tax deal is the status quo.  German officials would need to make individual requests when pursuing alleged tax cheats.  But that could also mean German officials would more aggressively purchase stolen Swiss bank data.  If German lawmakers reject the deal, it has a slight chance of survival in committee, but so far, most signs point to “no deal.”

U.S. bank clients casualties in an ‘economic war’?

When the CEO of Switzerland’s biggest bank calls tax disputes with the United States and other nations “an economic war” people take notice. UBS CEO Sergio Ermotti said that last month, as Switzerland faces a still contentious relationship with its neighbors and the U.S. hunting for untaxed assets hidden in the alpine confederation. The U.S. is the world’s only super-power, and has not shied from using its economic and diplomatic might to seek and reclaim back taxes, and punish banks who helped hide the money. But in any war, even an economic one, there are casualties. And the changes Swiss banks have made in response to the U.S. have made things for some Americans in Switzerland much more difficult.

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Katherine moved to Switzerland from Ohio in 2008 to be an Au Pair. The US was in the middle of its financial crisis and she figured “why not?” First order of business in Zurich was to get a bank account.

“I had gone to I think it was UBS the first time, and they had said that they didn’t offer any bank accounts to Americans who had less than $250,000,” she said. “My boyfriend, at the time, and I just laughed at that, like, ‘she has to have a bank account. She’s going to be living here.’”

Katherine was ultimately granted a young person’s account at UBS. Now, years later, the graphic designer and her husband are having account troubles again, trying to get a mortgage.

“We got so far along in the mortgage process that people were telling us it was a good time to buy, and then it was only literally right before we were going to sign the contract that we were finding out, ‘Wait a minute, she’s American, this is a red flag, this is a problem.’” …

More from The World

Swiss-Italian tax battle hurting border-region businesses

 

Despite its healthy share of sunshine, a dark cloud hangs over the canton of Ticino. A tax battle with neighboring Italy is aggravating cross-border relations — and it shows no sign of ending. Negotiations on a new double-taxation agreement between Switzerland and Italy have bogged down, with banking secrecy a key stumbling block. Fed up with waiting, the Ticino authorities last month took matters into their own hands, by blocking 30 million francs in taxes bound for Italy. Some Italian politicians took notice, calling for tax talks to start immediately, but progress is still slow-going. WRS’s Tony Ganzer reports:

The canton of Ticino is kind stuck between a rock and well..an international border. On one side stands a mountain range, separating the canton from the rest of Switzerland. On the other side is a vital trading partner–Italy. And caught in the middle are some businesses who say this tax fight is strangling the canton’s life blood—cash.

Take the Gruppo Siccurezza for example. The Lugano company with about 40 employees installs high tech security equipment, like CCTV cameras, or alarms, and it operates a 24-7 monitoring center for customers.

“Last year my company has suffered twice: the loss of clients, and twice because of the strength of the Swiss francs. We did lost about 25% of income,” says Company Chief Financial Officer Lorenza Bernasconi.

A sign on the way to Gruppo Sicurezza’s offices. (Photo: Tony Ganzer)

She says she’s lost about 20 clients, and has had to fire one employee since Italy added Switzerland to a black list of tax havens requiring more paperwork and fees to do business over the border.

Bernasconi says there is no doubt why customers left.

“Everyone told us because of these taxes, because of the black list. They are clients since 10 years, 8 years. It’s a pity,” she says.

In real terms, Bernasconi says the extra work could cost 3 or 400 euros every few months. For a security package costing 500 euros a year, those fees take away her business’s advantages.

Simona Morosini Marconi is vice director of Ticino’s chamber of commerce. She says the tax battle with Italy has gotten worse, and new requirements have burdened Ticino companies, especially those with Italian clients. She says the strong Swiss franc has hurt as well, though she admits the problem isn’t yet tragic—businesses are hanging on.

But any problem hurts, because, she says, the region lives from its connection to Italy.

“The peculiar situation that you can see here in Ticino concerning the people who work in Switzerland and in the evening go back home, is definitely due to the very nature of the Italian state and Italian economy,” says Nanad Stojanovic, who teaches political science at the Universities of Lausanne and Zurich. He is also a cantonal politician in Ticino representing Social Democrats.

“The Italian government itself is in a very difficult position, or let’s say even in a mess, because the coalition of Berlusconi is a rather weak one,” he says.

Italian Prime Minister Silvio Berlusconi has had to rely more on the populist Lega Nord party, Stojanovic says, which takes a more hard-line to taxes and Switzerland.

Meanwhile the populist Lega dei Ticinesi has connections with Lega Nord, but itself takes a hard-line on Italian workers crossing into Switzerland.

“This is a weird part of the story,” Stojanovic says, “because the economy of the canton of Ticino is clearly dependent on these workers coming every day from Italy to work in Ticino, and going back in the evenings.”

Stojanovic says this complicated political reality has made tax negotiations between Italy and Switzerland difficult, compounded by the Italian debt crisis, and long-standing dispute over Italian money hidden in Swiss banks.

For Lorenza Bernasconi with Gruppo Siccurezza, she can only hope for an agreement.

“The problem is that the Confederation doesn’t consider this problem like a [priority], but for the Italian part of Switzerland it is a big issue,” she says.

Both Italian and Swiss officials have said they are open to negotiations, but a concrete deal to end the tax fight is still out of sight.