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| Pressure: German Chancellor Angela Merkel (r.) met Feb. 27 with Prince Albert II of Monaco. Johannes Eisele/Reuters |
In Europe, widening probe targets tax haven
Some 10 countries are investigating suspects, including the US, which estimates that it loses up to $100 billion a year in unpaid taxes.
from the March 25, 2008 edition
Page 2 of 3
"Tax havens have declared war on honest taxpayers," says US Sen. Carl Levin (D) of Michigan, who along with Sen. Barack Obama (D) of Illinois is co-sponsoring the "Stop the Tax Haven Act," introduced last year. "What this [German scandal] demonstrates again is that tax-haven abuses are a worldwide problem."
It may also have unsettled some tax dodgers. Mr. Zumwinkel was the most high-profile of more than 160 suspects to be netted, and more than 150 have voluntarily come forward. Since then, dozens of Dutch nationals have also volunteered information about their savings. And there could be more: Last week, German newspaper Die Welt reported that a former employee of a Swiss bank offered to sell German officials files listing more than 30,000 account holders.
Britain, meanwhile, has written to 5,000 citizens believed to have offshore accounts warning them to disclose details of their savings, after an earlier initiative recovered $800 million. Ireland recently recovered almost €1 billion in an investigation, while an Italian tax amnesty raked in €84 billion, according to the OECD.
OECD: 'excessive' banking secrecy
Tax experts say it is perfectly legitimate to bank offshore for a number of reasons such as lower costs or lighter regulation.
"What needs to be made clear is that there is nothing illegal about holding bank accounts in Liechtenstein and wanting secrecy as long as you pay the right amount of tax in your own jurisdiction," says Chas Roy-Chowdhury, head of taxation at Britain's Association of Chartered Certified Accountants.
He says part of the objection is that smaller jurisdictions can afford attractive, low tax rates that result in "capital flight" from bigger countries. "Governments should open themselves up to the wind of global competition and accept that they need to run efficiently to keep tax rates low."
Ms. Perez-Navarro insists that it is "excessive" banking secrecy – and not the competitive tax regimes – that governments are objecting to. The OECD has fostered a range of international agreements to share information on bank accounts, which has increased cooperation from formally secretive havens such as Bermuda and Switzerland.
Perez-Navarro adds that individuals should have the right to a certain banking confidentiality, but that when investigators want to see numbers they should be handed over. "It's all about establishing a balance between the individual right to privacy and the law-enforcement need for information," she says.
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