-- Swiss-German tax treaty caught up in domestic politics
-- German opposition opposes treaty, Swiss may call
referendum
-- Swiss banks face uncertainty, costs
ZURICH--Swiss prosecutors Thursday said they opened an
investigation into the theft of data from Swiss bank Julius Baer
that German authorities allegedly bought amid a drive to crack down
on suspected tax evaders.
Tensions between Switzerland and Germany are already rising
ahead of a key vote in German parliament to ratify a treaty between
the two countries aimed at drawing a line under past allegations
that Swiss banks assisted tax evasion and at mapping out a future
path.
Signed by the two governments a year ago, the treaty has been
caught up ever since in domestic politics. Germany's opposition
Social Democrats consider it too soft on tax evaders and threatened
to bring the proposed deal to the upper house of parliament, where
they hold a majority.
Even though the treaty--and similar deals with the U.K. and
Austria--was approved by the Swiss parliament in May, it also faces
opposition here and may be contested in a referendum. The British
and Austrian deals could also be in jeopardy if opposition
intensifies.
For Swiss banks, this creates uncertainty and costs, because
they must move ahead with investments to implement the deal, but
risk having to write those expenditures off if the deal falls
apart.
Under the proposed agreement, Germans with hidden accounts in
Switzerland would pay a withholding tax to their home country each
year and be charged a punitive retroactive tax on undeclared
capital to regularize the past. In exchange, the Swiss won't turn
their names over to Berlin.
Germany's government still favors the deal, and recently said it
expects to collect around 10 billion euros ($12.6 billion) in
retroactive taxes from it. In Switzerland, banks and governments
back the deal because it allows them to draw a line under the past
and accept only declared assets going forward, while preserving its
precious bank-secrecy laws.
But the deal's planned implementation on Jan. 1 has become
increasingly uncertain in recent weeks after several opposition-led
states in Germany said the won't support it in a parliamentary vote
later this year.
The debate has became more heated since German media reported
that data containing details on clients of Julius Baer was
allegedly sold to the German state of North-Rhine Westphalia, which
is one of the fiercest opponents of the tax deal.
The office of Switzerland's attorney general Thursday said a
suspect has been arrested in connection with the alleged data
theft, but declined to provide additional information.
Julius Baer said it wasn't in a position to comment on ongoing
legal proceedings. But Chief Executive Boris Collardi confirmed in
a recent interview with Swiss weekly SonntagsZeitung that the bank
had fallen victim to data theft.
Last year, Julius Baer agreed to pay German authorities EUR50
million to end an investigation over undeclared client assets in a
separate case of data theft, while Credit Suisse paid more than
EUR150 million to settle a case looking into hidden assets held by
German clients.
"It would of course be annoying, if the agreement didn't come
into force," said Anne Cesard, a spokeswoman for the Swiss finance
ministry. Swiss banks could still go ahead with their strategy of
no longer accepting undeclared assets going forward, but they
wouldn't be able to fully shed their reputation of helping tax
dodgers, Ms. Cesard said.
It would also be costly. The Swiss Banking Association estimates
that investments into information technology, processes and
personnel to implement the treaties amount to around 500 million
Swiss francs ($523.2 million). Especially for smaller banks, the
costs are substantial, even more so considering that profits are
already suffering because clients are reluctant to hold anything
but cash in today's difficult financial markets.
The U.K. and Austrian governments have already ratified similar
treaties with Switzerland. But they may yet be subject to a Swiss
referendum, if opponents of the deal manage to collect sufficient
signatures to call a national vote ahead of a Sept. 27
deadline.
Write to anita.greil@wsj.com
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