Switzerland likes to think of itself as a neutral tax haven. Germany, however, thinks that its much more menacing than that, with Peer Steinbrück, the German finance minister, out and out accusing the Swiss of trolling for tax evaders, saying:
Switzerland offers conditions that invite the German taxpayer to evade taxes.
Steinbrück went so far as saying that Switzerland should be added to an international international blacklist of tax havens as reported by the the Organisation for Economic Co-operation and Development (OECD). The list includes Andorra, Monaco and yes, Liechtenstein, which has been under investigation for its own questionable practices.
Germany is not alone in a growing frustration with Switzerland. Eric Woerth, the French budget minister, has suggested that there may be economic retaliation for those countries which refuse to exchange tax information, including Switzerland. But maybe they don’t care: Switzerland, Austria, and Luxembourg refused to attend a recent conference to discuss tax transparency, as did the United States. Those countries that were in attendance, however, have demanded a revised list of “noncooperative” countries by summer 2009. That list could grow to include Panama, Gibraltar, Bahrain and perhaps even Singapore and Hong Kong.
Notwithstanding calls for a united front against these countries, Germany is refusing to wait for consensus and is taking measures into its own hands. The German government is moving to immediately boost supervision of German banks and insurance groups with offshore subsidiaries. Additionally, the German tax code is being amended to disallow exemptions on dividends for those countries who refuse to observe a sufficient amount of tax transparency as demanded by the OECD.
It will be interesting to see the fall out from this public break, especially as the global markets as taking a hit. While clearly Switzerland is not dependent upon money from one country, if similar measures are adopted in the 17 countries that attended the conference, the economic pressure could be enough for Switzerland to yodel a little differently. It did, after all, work for Liechtenstein.