Munich/Germany, 6 February 2010 – How can one get hold of the necessary bank documents quickly and safely without being prosecuted by the tax fraud investigation squad right before filing an amended tax return? Tax attorney Dr. Tom Offerhaus of the World Tax Service WTS offers advice: Have the declaration of profits handled anonymously during their preparation at a Swiss tax accounting firm.

“Due process or not, politicians do not have a choice but to at least seriously consider purchasing the stolen bank data,” says Dr. Tom Offerhaus, attorney and partner at the World Tax Service WTS in Munich. “If the government categorically refused to negotiate with the anonymous data traders, all those people who did not correctly file their taxes in the past would feel safe.”

At present, taxpayers with undeclared bank accounts in Switzerland as well as other countries such as Liechtenstein, Austria or Luxemburg are worried. Offerhaus: “This is exactly what the government wants. But Mr. Schäuble’s statement has given a clear signal that it is still possible to get off without being charged for tax evasion.” However, this only applies in the case that the tax fraud investigation squad is not involved yet. “The offender must not be aware of criminal or summary proceedings having been initiated. In the case that the specific offense has already been discovered and it can be assumed that the offender is aware of this fact, there is no chance to get off without penalty.”

The failure to make a voluntary disclosure might result in serious consequences: As a rule, tax evasion amounting to one million Euros or more will lead to a prison sentence without the option of probation, according to a ruling of the German Federal Court of Justice of December 2008. In the case of an exceptionally severe offense, a maximum prison sentence of up to ten years can be imposed. At the very least, the offender must be prepared to pay considerable fines on top of the back duty. In the above-mentioned ruling, the Federal Court made it clear that tax evasion was not at all a simple misdemeanor.

So it is hardly surprising that Dr. Offerhaus has received more phone calls than usual in the last few days. As the Head of Private Client Services at WTS, one of Germany’s leading tax consulting firms with an international network spanning 92 countries, he can guarantee that a voluntary disclosure is handled completely anonymously until it is actually handed in to the authorities. “In such a case, our Swiss subsidiary would collect the declarations of profits from the banks and make sure that the documents are made anonymous and forwarded to us.” In a second step, tax consultants and attorneys in Germany would prepare the amended tax return without including a client’s name to prevent the risk of detection in the days right before a voluntary disclosure is made.

What should people do who, in light of the current developments, worry about their neglect to report investment income generated in Switzerland? “In such a case we can only advise to make a voluntary disclosure immediately,” says Dr. Offerhaus. “Tax evasion is the only offense which you can undo as it were by doing that.”

“In the case that there is no time to lose, the voluntary disclosure should initially be made on the basis of a generous estimate. It is possible to hand in later a detailed amended tax return which hopefully includes more favorable figures. In the case that we are dealing with a particularly severe act of tax evasion, the voluntary disclosure should comprise the past ten years. In all other cases, the last five years would be sufficient as the statutory limitation for criminal litigation in cases of simple tax evasion is five years.

A voluntary disclosure of the previously undeclared profits for the last five years plus settling the back duty for this period might be sufficient to reach exemption from punishment. However, back duty also has to be paid for the previous five-year period. In addition to the taxes, offenders must also pay interest on the outstanding taxes, to the amount of 6 percent annually. “I am sure quite a few taxpayers will be surprised how small the back duty is compared to the value of the assets,” the tax attorney reassures potential offenders.

Speed is key when it comes to voluntary disclosures. According to Dr. Offerhaus, the name of a taxpayer on a data CD obtained by the German tax fraud investigation squad does not constitute the detection of an offense. The detection of an offense legally requires the comparison of the obtained data with the personal tax returns of the taxpayer in question. “In the present phase, people do not have to consider their offense detected. For this would mean that they knew their names were on the CD.”

Dr. Offerhaus is convinced that the current indiscretions will affect bank clients in all of Germany, not only those in North Rhine-Westphalia, Baden-Württemberg and Bavaria. He also deems it possible that bank employees worried about being charged with aiding and abetting tax evasion might agree to cooperate with the fiscal authorities.

Is this the end of the Swiss banking secrecy, also in political terms? Tom Offerhaus: “I think that sooner or later even Switzerland will have to give in and modify the banking secrecy rules we have known for the last few decades. Switzerland has agreed to exchange information with several other industrialized nations. There are even considerations about introducing an automatic exchange of information. I expect the ratification of an agreement between Germany and Switzerland as early as this year, which will cancel the banking secrecy as an obstacle for the exchange of information between the countries involved, at least in the case of specific requests based on existing suspicions. I furthermore expect the banking secrecy in Switzerland to decline in importance, comparable to the role it plays in Germany. Most likely, in the future it will not provide any protection even in Switzerland if there are clear indications to suspect tax evasion.”

1. Avoid prison sentences and fines by making a voluntary disclosure.
   
2. Taking action before the offense is detected is vital.
   
3. Nobody should have a Swiss bank send declarations of profits that include their name to one’s German address until the voluntary disclosure has been handed in.
   
4. Those who hand in a preliminary estimate should keep it generous to guarantee that the full scope of the tax evasion remains exempt from penalty. 
   
5. Say goodbye to Swiss bank accounts as an anonymous form of investment. It is expected that Switzerland will sign an agreement on the cross-country exchange of information as early as 2010. 

Pictures and Press Materials

 Photo Dr. Tom Offerhaus

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