Tuesday, September 18, 2012

Crucial battle on tax transparency in German Bundestag

Cross-posted with the EU Observer blog:
The German Bundestag is to hold an official hearing on Monday (September 24th) on the bilateral Swiss-German "Rubik" tax agreement, which has been signed by both countries but not yet ratified in Germany. The hearing will pit Swiss bankers and their supporters against supporters of financial transparency, who argue that such a deal would undermine democracy, weaken global standards of information exchange, sabotage progress on the European Union's Savings Tax Directive, entrench secrecy - and raise almost no revenue.
The full list of presentations is here.
I consider the most important three submissions to be as follows:
  • Professor Itai Grinberg of Georgetown University Law Center, U.S. He argues that German ratification of the Rubik deal would stifle the emergence of a multilateral automatic information exchange system, which is a far better system than what Switzerland is offering. By ratifying this, Germany would not only be less able to address its own concerns with tax evasion through foreign accounts, but it would also slow the development of a multilateral system that would allow many other countries around the world to effectively address tax evasion by their wealthiest citizens. He also notes that Switzerland has
  • Mark Morris, a Swiss-based private consultant, who explains in detail how virtually all of the €250 billion German-owned assets in Switzerland will escape a Swiss-German Rubik agreement because of egregious loopholes, which he outlines in some detail. He explains how no bilateral deal of any kind could possibly plug the holes: only a multilateral approach can possibly pierce the multi-jurisdictional structures that are commonly used for tax evasion. Automatic information exchange would bring Germany an estimated 15 times the revenue from Rubik, he estimates.
  • Markus Meinzer of the Tax Justice Network has a long submission echoing Morris' and Grinberg's points, and among outlines the political and economic damage that would ensue from ratification of such a deal.
As Grinberg notes:
"The international tax system is in the midst of a battle between automatic information reporting and anonymous withholding models for ensuring that nations can tax the foreign financial accounts of their residents. At stake is the extent of many countries’ capacity to impose an income tax on the investment income of individuals and the profits of closely held businesses in a world that is increasingly financially integrated.
The German "Rubik" hearing will represent a major skirmish in this emerging global battle. May the best arguments win.


Post a Comment

<< Home