Only a few days after German tax authorities raided the offices of Credit Suisse and executed searches of the homes of several German customers in an ongoing inquiry aimed at cracking down on suspected tax evaders, information surfaced that Germany’s most populous state, North Rhine-Westphalia, has again bought a collection of stolen data on Swiss bank account holders.  The German state is reported to have paid  approximately 3.5 million Euros to an unnamed whistleblower. The compact disc  allegedly contains the names and account information of about 1,000 wealthy Germans who are customers of the Zurich branch of Coutts, the private banking arm of Britain’s Royal Bank of Scotland. 

The purchase of the CD is considered a blow to the tax evasion treaty signed by Germany and Switzerland in September 2011 that seeks to resolve an ongoing tax dispute.

Under the tax evasion treaty German tax evaders would make a one-time payment of between 21% and 41% of the funds they have hidden in Swiss bank accounts.  In return, the account holders would remain anonymous to German tax authorities and face no penalties. In addition, Germany agreed to no longer seek to acquire customer data stolen from Swiss banks.

The treaty is scheduled to come into force on January 1, 2013 but needs approval of the upper house of the German parliament, the Bundesrat. The Social Democrats are blocking the treaty’s adoption in the Bundesrat, arguing that the treaty is too lenient and includes too many loopholes for tax evaders. North Rhine-Westphalia’s finance minister, a Social Democrat, favors continuing to buy data on suspected evaders, despite the signed treaty. According to his recent announcement, North Rhine-Westphalia is considering buying two more CDs offered to it.

North Rhine-Westphalia’s most recent purchase of Swiss bank account data reignited the debate in Germany about appropriate methods for cracking down on German tax evaders with Swiss bank accounts.  It also caused a stir in Switzerland and  strained the already tense relationship between the two countries. Switzerland considers the purchase of stolen bank account data to be at odds with the signed treaty. In an interview with the Swiss newspaper Blick, the president of the Swiss Confederation, Evelin Widmer-Schlumpf, said that the tax treaty is Switzerland’s last offer to Germany.  She went on to say that if the current treaty is not ratified, Switzerland will not negotiate any further with Germany.

These recent developments demonstrate that countries other than the U.S. are also taking a firm stance in dealing with their citizens’ use of Swiss bank accounts to evade taxes.

Cindy Lahusen, from Gleiss Lutz, wrote this article.