Tax row escalates

The Dusseldorf-based government of Germany's most-populous state North Rhine-Westphalia (NRW) has confirmed that Swiss prosecutors want three NRW tax inspectors arrested for alleged "economic espionage."

NRW premier Hannelore Kraft said on Saturday she was outraged by the development. "The NRW tax inspectors were only doing their duty to chase German tax cheats who had put their untaxed money in Swiss bank accounts," she said.

The affair - initially reported by the newspaper Bild am Sonntag - goes back two years to a stolen CD that exposed German customers of the Credit Suisse bank. It was purchased in 2010 by NRW, reportedly for 2.5 million euros (3.2 million dollars), enabling NRW prosecutors to extend tax evasion probes within Germany.

German Federal Finance Minister Wolfgang Schäuble, reacting to the new spat while attending EU talks in Copenhagen, said he saw no connection between the Swiss warrants and a draft German-Swiss deal. Switzerland was "just as independent" as Germany in its tax set-up, he said.

That pending deal would allow German tax evaders to make one-time payments to German tax authorities to legalize money hidden in Swiss bank accounts. A withholding tax would similarly extract revenues from future asset earnings in Switzerland.

Draft deal controversial in Germany

The accord, however, still needs the ratification by Germany's upper chamber of parliament, the Federal Council, which represents Germany's 16 regional states, including NRW.

Within the council, known in German as the Bundesrat, Chancellor Angela Merkel's center-right coalition lacks a majority.

Members of Germany's opposition Social Democrats, including Kraft, as well as the opposition Greens have been pressing for tougher terms than those originally negotiated for the deal.

Kraft, whose governing Social Democrat party faces a snap election in NRW in May, told Bild am Sonntag that "big loopholes" allowing tax dishonesty "can't be explained to honest citizens."

The Swiss federal prosecutor's office said on Saturday that it had sought legal assistance from German authorities in an investigation into the theft of Credit Suisse data.

The office said it had a "concrete suspicion that concrete orders were issued from Germany to spy on information" of Switzerland's second-largest bank.

Experts have estimated that up to 200 billion euros of illegal untaxed money from Germany sits stashed in Swiss accounts.

ipj/tj (dpa, AFP, AP, Reuters)