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.
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.
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.”
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.
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.”