Of Special Interest


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16th September 2011

Germany may not ratify Swiss tax treaty

The Social Democrat Party in Germany, which has a majority in the Bundesrat, the upper parliamentary house, is threatening to vote against the tax deal relating to Germans with Swiss bank accounts agreed between the German and Swiss governments. The SDP politicians argue that the withholding tax model does nothing to reduce the extent of money laundering as the identity of the account holders remains secret. The German deal was used as a model for a similar deal with the UK and was widely expected to form the model of future deals between Switzerland and various other European states.

This is a particularly serious matter for Switzerland who had thought that the withholding tax model would at last settle the tax dispute with most countries and offer private banking in Switzerland some certainty as to its future. The German government points out that the deal will generate an additional sum of around €20bn in taxes at a time the country could really benefit by the money. The SDP insist they are not 'to be bought off' and are out to correct a wrong.

An interesting point, aside from a single initial upfront payment is that the tax deals with Germany and the UK do not penalise the account holders for not declaring the accounts. The tax amounts applied are not penal rates and are instead designed to reflect the current rate of taxes in the national's country. (In the case of the UK it assumes the person is earning at the highest tax threshold of above £150,000 per annum which implies a tax rate of 50%).