Potential Loss of Reputation as a Result of WikiLeaks
Will honest tax payers come under pressure?Munich, 07 February 2011 – Mid-January 2011 the disclosure platform WikiLeaks received data of suspected tax evaders. These concern individuals who invested funds in offshore financial centres. The sensitive bank data could also incriminate German tax payers. If and to what extend this information will be disclosed is not yet certain. The instrument of voluntary disclosure which particularly in this context might be a way out for tax evaders - at least with regard to the immanent risk of being penalised could become more expensive as of April this year.
As soon as WikiLeaks has finished the review of the records of approximately 2000 bank clients, the existing information could indeed be disclosed. The individuals concerned apparently include wealthy celebrities, business leaders and MPs in the USA, Europe and Asia. Also German tax payers could come under pressure as the financial authorities will read these details, too. The data refers to the period from 1990 to 2009.
Certainly, tax evaders will hence get into difficulties. At the same time, it is also possible that WikiLeaks will publish details of honest tax payers. How is WikiLeaks supposed to know who has duly paid taxes on profits in offshore accounts and who has not? At the moment, it is not yet clear at all to which extend and according to which criteria the data will be filtered after the review by WikiLeaks. Yet there is still the risk for honest tax payers to be mentioned together with tax evaders.
The role of WikiLeaks as a disclosure platform is a completely different story. "The disclosure of matters relating to government affairs that are in the public interest is one thing, but the disclosure of personal data of respectable tax payers who invested their assets in Switzerland is of an entirely different quality“, states Dr. Tom Offerhaus of WTS in Munich.
As it looks likely at present, tax evaders still have a period of grace until a potential publication: "The situation is becoming more and more serious and not only because of WikiLeaks; therefore anybody affected should consider the possibility of a voluntary disclosure“, says Dr. Offerhaus.
The sale of CDs with bank data to the German financial authorities only triggered a process that now has gained a completely new dimension. The legislator, for instance, will soon pass a new law concerning voluntary disclosures. The so-called law to combat unreported income shall come into force not before April 2011. According to the draft legislation proposed by CDU/CSU and FDP the amendment shall ensure that tax evaders are no longer rewarded with an exemption from punishment when they file a voluntary declaration upon imminent risk of disclosure. Partial voluntary declarations should not result in a partial exemption from punishment but the principle of ‘all or nothing’ should apply. Contrary to the draft legislation the finance committee of the Bundesrat wants to combine the exemption of punishment after a voluntary disclosure with a fine to be paid in addition to the tax evaded and the interest due. On 27 January 2011 a clear majority of the Bundesrat finance committee recommended an amendment of the draft legislation proposed by the government. In this specific case this means: The repentant tax evader who makes use of the voluntary disclosure process has to pay a 5 per cent surcharge on the amount of tax evaded in order to avoid punishment. In addition, a majority advocates amendments of the grounds for exclusion from a voluntary disclosure to avoid punishment.
Furthermore, the disclosure clauses in the double taxation treaties with the neighbouring countries Austria and Switzerland have just been reviewed. The banking secrecies in these countries will no longer remain an obstacle for specific requests for tax-relevant banking information. This applies to the assessment periods after 1 January 2011. "It may, however, be illusory to believe that the protection of the banking secrecies in these countries still applies for earlier periods as the customer has a greater burden of proof in offshore matters, i.e. the customer has to prove that he had no undeclared offshore income in the past", says Dr. Offerhaus.
