For several years, German Chancellor Angela Merkel has been sort of quietly leading an international effort to end tax evasion. Instead of targeting Germans driving Ferraris, she’s focused on the ways the über-rich legally evade paying taxes – by parking their money in those countries known as tax havens, Switzerland, the Cayman Islands and Bermuda are the most well-known. The Caymans not only lets individuals park their fortunes in banks and protected hedge funds, but allows companies to claim the Caymans as their “home office” with nothing more than a mail box. The Caymans operates on a volume basis, so people and companies pay small fees, but there are so many of them, they support the country.
Switzerland is different. It operates on a policy of deep secrecy. Park your money in a Swiss bank and no one, no government, no international agency can even verify you have an account there.
After years of negotiations, Switzerland agreed to allow German tax authorities to request information concerning Germans’ secret accounts that were emptied before the new German law levying taxes on German national’s Swiss accounts took effect. The Swiss parliament is expected shortly to pass a law allowing inquiries from German back-dated to 2011.
The deal between Switzerland and German is due to take effect next year and is expected to net Germany a considerable amount of money. Germans are keeping around $184 billion in Swiss banks. But the deal was thrown in doubt when it was learned that some Swiss bank employees had sold CDs with details of German bank accounts to the German government.
The irony is priceless. There have been only two major WikiLeaks revelations since Julian Assange was arrested to be extradited in England two years ago. The latest was the private e-mails of the al Assad regime (sappy love songs and shoe addiction) and the earlier one was a collection of Swiss banking transactions, most of them out-of-date. The “whistleblowers” decided to bypass the glory of standing besides Julian Assange and publicly handing over the discs and instead make a tidy sum of money off their stolen data.
The purchases have set off a public debate in Germany, with about 60 % of Germans supporting the purchase and member of the government condemning it. Foreign Minister Guido Westerwelle said “It is unsavory and questionable to buy stolen goods. We need to put an end to these business methods.” Then, he went on to urge the passage of the laws that will make this “unsavory” practice unnecessary.
Tax havens, both those that shield individual wealth and those that provide homes to multinational corporations, are a drain on industrialized nations. They skew the tax structure even more than the tens of thousands of pages of tax breaks and exclusions within a nation’s own code. The only hope for a truly fair tax structure for everyone, no matter what country they are in, is to end the means by which individuals and corporations evade taxes. Though Chancellor Merkel has been portrayed as a harridan in the Eurozone crisis, there is much in her economic philosophy that is worth supporting. The burden of bailing out Europe, and the United States for that matter, should not be borne solely by the middle class and working poor. Merkel believes it is the responsibility of all persons and companies to pay their fair share.