18

Aug

Steuersitz

Coxswain’s seat (lit. “steering seat”).

Or, the tax district where your company is headquartered, taxable situs (lit. “tax seat”).

The Obama administration is thinking of ways to, unfortunately without the help of the U.S. Congress, prevent U.S. companies from buying a foreign company headquartered in a low-tax country such as Ireland, Holland or Switzerland and then moving their Steuersitz there in order to pay lower taxes. For example, the U.S. government could stop purchasing from companies that do this. That would especially affect enterprises in the health care sector or defense industries (and in the U.S. almost every company provides goods or services to the military).

(SHTOY ah ZITZ.)

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22

Jul

Die größte und bedeutendste Steuerkonferenz in Deutschland, die es je gegeben hat

“The biggest and most important tax conference ever held in Germany,” which will be in Berlin in October 2014 to sign, seal and deliver the new international agreement for the automatic exchange of tax data, after it is approved by the G20 finance ministers in September 2014.

67 countries and legal regions are on board; 40 want to implement the new O.E.C.D standard in 2017. Countries implementing the standard include Switzerland, Luxembourg, Liechtenstein, Singapore, the British Virgin Islands, the Bermuda Islands and the Caymans.

This achievement was accomplished by pressure from the U.S., whose “Fatca” law required banks outside the U.S. to provide tax information about customers who had to pay tax in the U.S. The U.S. negotiated this in bilateral agreements. Then five E.U. countries said if the U.S. could do it, the E.U. should as well.

“The task of automatically exchanging the many billion data that could be relevant for the financial authorities across borders is considered extremely complex. It has already been decided that all sorts of income will have to be reported, including interest, dividends, income from insurance contracts but also capital gains [from sales]. Banks will be involved but also brokers, investment funds and insurers. This will cover the accounts held by natural persons and by trusts and foundations and the natural persons who control them. Finally, guidelines on implementation and specific details on the safe transfer of data were worked out.” —Frankfurter Allgemeine Zeitung

(Dee   GRISS ta   oont   bed OY tend sta   SHTOY ah cone fah RENTS   inn   DEUTSCH lonned,   dee   ess   yay   geg GAY ben   hot.)

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02

Jul

Ameisenverkehr

Ant traffic.

Now that Swiss, Austrian and Liechtenstein banks are about to stop allowing anonymous accounts for foreign tax evaders, Bavarian police and customs officials have been catching more people trying to transport large amounts of cash. They are also suspicious of attempts to bring expensive boats into Germany across Lake Constance. Wristwatches can transport wealth out of Switzerland.

Police said they’re calling the Eurocity train between Munich and Zurich the “black money express.” Transporting large sums of cash in small quantities is “ant traffic.” They watch for wealthy-looking retirees who are behaving suspiciously.

(OM eye zen fair CARE.)

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23

Apr

0.02 Prozent

In September 2013 Italy became the world’s first country to introduce a tax on high-frequency trading. Italy’s government now collects 0.02% on all trades that take place in less time than half a second.

(Nool comma nool tsvy   prote CENT.)

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16

Apr

Brennelementesteuer

A tax on the radioactive fuel elements used in nuclear reactors. Germany’s federal government created this tax in 2011 (the relevant law is called the, ahem, Kernbrennstoffsteuergesetz). Apparently the fuel rods tax has had a deterrent effect on the operation of nuclear power plants, while bringing in billions in revenue. Some utilities have challenged the tax in court.

Two lawsuits are pending before the Munich Financial Court. A court in Baden-Württemberg found that the fuel rods tax was okay. Relevant cases are also going to be heard by the German Constitutional Court and the European Court of Justice.

The Hamburg Financial Court referred the question of whether the fuel rods tax is “even permissible” to the European Court of Justice in November 2013. That court could take more than a year to issue a decision.

After the Hamburg Financial Court had referred the larger question to the higher instance, it then decided this week, in response to accelerated petitions from the utilities, that the utilities could be temporarily freed from paying the fuel rod tax and that the German treasury should temporarily return 2.2 billion euros of paid tax to the utilities pending the higher courts’ decisions. The court said the government could appeal though, and if the government appeals within one month they would be temporarily freed from having to make the return payment.

(Bren ell em EN tah shtoy ah.)

(CAIRN bren shtoff SHTOY ah gez ETTS.)

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26

Feb

Verrechnungspreismissbrauch

Transfer pricing tax evasion.

Under international finance rules that allowed corporations to assign profits earned by subsidiaries in countries with taxes to subsidiaries in countries without taxes, an online documentary explained, commodities companies could avoid taxes in source countries by having their extracting subsidiary sell the commodity to subsidiaries abroad at prices that did not reflect market prices, moving around on-paper profits and on-paper losses. The tactic is called transfer pricing. Rules supposed to prevent it required among other things that divisions of the same organization deal with each other “at arm’s length,” as if they were not part of the same organization.

Profits from this and other paper shuffles can apparently show up decades later and inflict serious fiscal damage on countries, even countries with the resources to give government auditors enough training to stand up to international corporations’ negotiators. In 2013 Rupert Murdoch’s giant News Corp. appears to have received the “largest cash payout from the Australian Tax Office ever,” a rebate of US$800 million for some on-paper loans to itself made in 1989. The money showed up in News Corp’s U.S. subsidiary’s Q4 2013 accounts as a US$800 million payment from “a foreign tax authority.” The original deduction was estimated by the Australian Financial Review at AU$600 million, but it was decided that News Corp was owed additional interest on it of almost AU$300 million.

The huge payment is being described as a substantial inconvenience or “blowout” to the current Australian federal budget. Last summer then-Australian prime minister Kevin Rudd accused News Corp companies in Australia of running a “ferocious” media campaign against his government, including accusing the Labour government of overspending. Kevin Rudd lost the Australian election to Tony Abbott on 07 Sep 2013.

This is how the tax deduction happened, according to an online 17 Feb 2014 article from the Australian Financial Review:

“In a 1989 meeting, four News Corp Australia executives exchanged cheques and share transfers between local and overseas subsidiaries that moved through several currencies.

“They were paper transactions; no funds actually moved. In 2000 and 2001 the loans were unwound. With the Australian dollar riding high, News Corp’s Australian subsidiaries recorded a $2 billion loss, while other subsidiaries in tax havens recorded a $2 billion gain.

“By last July that paper “loss”, booked against News Corp’s Australian newspaper operations, had become an [A]$882 million cash payout.

“Under a legal arrangement when the company was spun off last June, News was forced to pass all of the tax payout to Mr Murdoch’s 21st Century Fox.

“News Corp said it had retained $A81 million because it faced income tax charges on the interest payments by the Tax Office. However it seems unlikely to actually pay these funds: News Corp Australia carried another $1.5 billion in tax deductions from a separate paper shuffle that it made when News reincorporated in the US.”

(Fair ECHH noongs price mis BROW chh.)

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05

Dec

Verschleierte Vermögensverwaltungsverträge

Veiled wealth management contracts.

270 tax police searched about 40 Commerzbank branches at their Frankfurt headquarters and elsewhere on 03 Dec 2013 seeking information about Italian partners who had advised the bank’s customers on how to avoid taxes using what only looked like tax-exempted life insurance, according to Bochum prosecutors who executed the razzia with Düsseldorf tax officials.

ZDF heute journal’s finance correspondent Valerie Haller said assets such as stock or bonds in “depots” at the bank that should have been subject to capital gains tax were instead “wrapped in fake life insurance” by the friendly insurer. The long (12-year) period of the fake life insurance instruments conveniently allowed some tax evasion statutes of limitations to expire. Unlike real life insurance, these instruments let customers continue investing the money wherever they chose while avoiding significant tax and remaining rather anonymous. Real life insurance that qualifies for German tax breaks must also insure against a risk (the death of the insuree), according to a German law passed in 2009 to tighten up these loopholes. After the 2009 law, said a 2012 S.Z. article, such life insurances bought by Germans had to be reported immediately to the Bundesfinanzministerium [Federal Finance Ministry] when bought in Germany, but when bought outside the country the sellers were only obligated to report them to the German government when the policies were paid out.

The Italians are rumored to have been working for an Italian insurance company called Generali, though that has not been confirmed. Handelsblatt.com heard it was Generali subsidiary PanEurope Ltd., headquartered in Ireland, and added that the scheme had a minimum deposit requirement of half a million euros but prosecutors thought this one had been used to avoid taxation on several hundred million. Reporting on a similar investigation in 2012 of German insurance customers at the Swiss bank Crédit Suisse, Süddeutsche.de said English names for the scheme included “insurance wrappers” and “private placement insurance.”

Commerzbank is only being called as a witness, the bank’s representatives said. They only managed das Depot, which translates as portfolio but has always sounded more like an armored box.

The Green party took advantage of the event to call once more for a German criminal code for companies, in addition to individual people, so that companies can be prosecuted for crimes.

(Fair SHLY ah teh   fair MƏG oongs fair VAULT oongs fair TRAY geh.)

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22

Nov

Staatliche Umerziehungslager erübrigen

Making government re-education camps unnecessary, surplus to requirements, superfluous.

As part of the exciting reform package announced on 15 Nov 2013, China will be eliminating labor camps from its criminal justice system! No time schedule was mentioned though.

Other reforms that were announced, translated from Spiegel.de:

  • Further loosening of the one-child rule.
  • Opening the financial sector to include “smaller and medium-sized banks” in future.
  • More market-driven pricing. “Prices set by the state are to be limited to public institutions and services, be transparent and by checked by the public.”
  • More transparent currency exchange policy.
  • More entrepreneurship that is private, including more private investment and not ruling out foreign private investment.

N.B.: On 19 Nov 2013 Daimler announced it would be the first international auto manufacturer to invest directly in a state-owned Chinese auto manufacturing company, buying 12% of its Chinese co-manufacturing partner, a cars subsidiary of Beijing Automobile Investment Company Limited. The 625-million-euro deal took nearly a year to negotiate. Daimler will get two seats on the supervisory board [Aufsichtsrat] of the Chinese company.

  • Introduction of a standardized and transparent budget and tax system. Reform and simplification of value-added tax (a sales tax). Consumption taxes [Verbrauchssteuer] to be expanded to high-electricity-consumption industries, environmentally unfriendly industries and luxury goods.
  • Land reform, including relaxing limitations on dealing with land in collective ownership (this could be good, could be bad!).
  • Better systems for fighting corruption, on all levels.

Spiegel.de wrote that German industry and economics leaders welcomed these changes, expecting good results from them and from other reforms such as improvements in social welfare services.

Update on 28 Dec 2013: China implemented the announced reforms.

(SHTOT lichh eh   OOM eah TSEE oongs LOG eah   er-r-r ÜÜ brig en.)

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18

Nov

P.K.W.-Maut

Car toll.

The C.D.U.’s Bavarian state sister party made a strange campaign promise for the Sept. 2013 election that they would levy a toll on foreign drivers entering Bavaria. It seemed this would be illegal in the E.U., in addition to unethical. The C.S.U. said the country of Austria was doing it, so why couldn’t the state of Bavaria? During the sole televised debate between the two biggest parties’ candidates—in Germany’s deliberately foreshortened campaign, kept brief by electoral laws—Angela Merkel quietly said “no” to the foreigner toll. Horst Seehofer (C.S.U.) swore his party wouldn’t sign a new federal coalition agreement with the C.D.U. without it.

The C.S.U. was re-elected in Bavaria and might be able to rule alone there with no coalition partner (they’ve been in charge in Bavaria since 1946).

In a surprise move, after the German elections a decision was announced from the E.U. transport commissioner Siim Kallas (libertarianesque Estonian Reform Party) indicating Brussels might allow such a state tax on foreigners! In the E.U.! Though they backtracked afterward, it still appeared the P.K.W.-Maut might be allowable were Bavaria to make all drivers entering the state pay a toll and then selectively refund it via the annual tax paid by car owners. That method would miss refunds to numerous deserving Bavarians—electric cars and other environmentally friendly cars already get car tax refunds for example—and the C.S.U. was scratching their heads about how to announce that those car owners wouldn’t be taxed like a foreigner. German consumer protection advocates and apparently a study by the country’s equivalent of A.A.A. (A.D.A.C., the General German Automobilclub) said the proposed toll’s stated intended benefit for infrastructure construction was disingenuous because it would create more administration costs than revenue; if this is true it makes the toll appear more racist. The toll would also irritate non-Bavarian Germans, many of whom were already looking askance at the Bavarian conservative politicians’ attempt to stoke up Ausländerfeindlichkeit, hatred of foreigners, and surf it to power.

Thomas Oppermann (S.P.D.) pointed out that, in the grosse Koalition negotiations to form the new government, the C.D.U. had firmly refused the S.P.D.’s campaign promise to inflict new taxes on the rich yet it would allow this new tax on people who aren’t wealthy.

Investigating the issue in more detail, on 07 Nov 2013 ZDF heute journal interviewed a traffic-expert pundit professor who estimated Germany needed ~7 billion euros more per year to fix its road infrastructure, i.e. more than doubling their current expenditures. He particularly used the example of bridges.

Reporting on 07 Nov 2013 seemed to indicate the debate had expanded to include introducing car tolls on all German autobahns, perhaps merely responsible political debating about any potential reforms or perhaps what it might take to weasel in the Bavarian foreigner disincentive under current rules. The numbers are still unclear, with the C.S.U.-led federal transportation ministry estimating much higher revenues from new car tolls than others estimated. ZDF listed approximate annual numbers from countries who’ve already introduced an autobahn car toll:

Austria. Car toll: 390 million euros, truck toll: 1,100 million euros; 800 million euros spent on annual road construction and maintenance. About half the car toll revenues come from foreign drivers. The Austrian car toll is about 80 euros/year, for residents and foreigners alike.

Switzerland. Car toll: 300 million euros, truck toll: 1,250 million euros; 1,250 million euros spent on annual road construction and maintenance. About 1/3 of the car toll revenues come from foreign drivers. The Swiss car toll is about 33 euros/year for residents and foreigners alike.

Germany. Truck toll: 4,600 million euros; ~5,000 million euros spent on annual road construction and maintenance. Estimates for revenues from an autobahn car toll vary between 350 and 700 million annually (the low number is from the A.D.A.C. drivers’ association and the high number is from the C.S.U.-led transportation ministry).

Austria and Switzerland said they spent 7% to 12% of the autobahn car toll revenues on its administrative costs. In Germany administrative costs could be much higher because of the C.S.U.’s plan to return the money to Bavarian drivers by offsetting it from their car tax. The toll might thus merely bring a bad reputation, highly-public permission for anti-foreigner sentiment and at most a few hundred million euros to fix a budget gap of billions.

Update on 11 Nov 2013: The two parties agreed to temporarily stop discussing a new car toll in their grosse Koalition negotiations.

Update on 27 Nov 2013: Austria and Holland threatened to sue Germany before the European Court of Justice if Germany implements the C.S.U.’s car toll on foreign drivers. The negotiated grosse Koalition agreement presented on Wed. 27 Nov 2013 said yes to the toll if it violated no E.U. rules and negatively impacted no German drivers.

Update on 01 Dec 2013: Protesters walked carrying signs on the Bavarian and Austrian sides of the Inntal A12 autobahn, demonstrating against car tolls. Austria had announced it would create a new checkpoint there to verify that drivers had paid its car toll, probably in reaction to Bavarian politicians’ insistence on an anti-foreigner car toll. People living on both sides of the border fear cars will start filling up local roads trying to avoid the highway tolls. Strolling on the autobahn with friends and neighbors looked rather pleasant, and the Bavarian and Austrian mountains there are so beautiful.

(Pair ZOH! nen croft vog EN   m OW! t.)

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06

Nov

Beibehaltung

Retention.

April 2013: After it became known the chair of the supervisory board [Aufsichtsrat] of Germany’s richest and most successful soccer team, Bayern Munich, was under investigation for voluntarily reporting himself [Selbstanzeige] as having an insufficiently reported and taxed ~500 million euros in a Swiss bank account, there seem to remain some loose ends in his origin story for where the half billion came from*. Yet on 06 May 2013 Bayern Munich’s supervisory board voted not to accept Uli Hoeneß’s resignation as its head. Members of the supervisory board who supported Mr. Hoeneß at this meeting included: Herbert Hainer, C.E.O. of Adidas. Rupert Stadler, C.E.O. of Audi. Timotheus Höttges, chief of Finances and Controlling at top Bayern sponsor Deutsche Telekom. Martin Winterkorn, C.E.O. of Volkswagen. Edmund Stoiber (C.S.U.), former candidate for German chancellor in the C.D.U./C.S.U. party.

10 May 2013: Mr. Hoeneß is suing the responsible prosecutor’s office for being the source of the press’s discovery of the investigation into the mysterious half billion euros, in April 2013.

30 Jul 2013: Uli Hoeneß has been charged with alleged tax evasion. The Economic Crimes Chamber [Wirtschaftsstrafkammer] of the second Munich Landgericht [Münchener Landgericht II] must now decide whether it will allow the trial to proceed and whether to open the main trial. The decision is expected in late September 2013.

04 Aug 2013: The president of the German Soccer Association [Deutscher Fussballbund e.V., D.F.B.], Wolfgang Niersbach, declared his support for Uli Hoeneß.

07 Aug 2013: Stern.de report that an anonymous informant told the second state prosecutors office in Munich [Münchener Staatsanwaltschaft II] that Mr. Hoeneß’s untaxed millions are not limited to one account at the Swiss Vontobel bank (said by prosecutors to have contained 500 million Swiss francs but said by Mr. Hoeneß in April 2013 never to have exceeded around 15 to 20 million euros, tops). Stern.de reported the informant said Mr. Hoeneß’s Vontobel account had balances consistently [“durchgehend“] exceeding 500 million Swiss francs in years before 2008 and also supplied information about stock dealings and transactions involving numbered accounts at three other Swiss banks: Crédit Suisse, Julius Bär and the Zürcher Kantonalbank.

The whistleblower said Deutsche Telekom stock with which Mr. Hoeneß participated in so-called dividend stripping was also involved.

04 Nov 2013: Mr. Hoeneß will have to “answer before a court” after all, starting ~10 Mar 2014. Landgericht Munich II’s “Economic Chamber” [Wirtschaftskammer] announced it will allow trial of charges against him of tax evasion and providing inaccurate answers. His Selbstanzeige earlier this year “contained errors.”

Frank Bräutigam, ARD tagesschau.de’s excellent legal correspondent, said the trial will evaluate the correctness of the Selbstanzeige (timeliness, completeness and accuracy). If the court determines that the Selbstanzeige was not properly executed, next it must decide how much money was improperly handled and what penalties could be imposed.

The Bayern Munich football club’s supervisory board reconfirmed that they want to retain Mr. Hoeneß as president of the club.

14 Mar 2014: Uli Hoeneß’s trial for 3.5 million euros of tax evasion was this week. In the two weeks before the trial started on Monday, he apparently gave prosecutors 50,000, some said 70,000, pages of Vontobel bank account statements previously withheld. On Monday he surprised reporters by announcing he’d actually not paid 18 million euros tax, but this was the ultimate number, no more revelations. On Tuesday, an auditor testified that the amount was actually 27 million. He was found guilty of 28.5 million euros in tax evasion and sentenced to 3.5 years, which will probably be in an open prison. On Friday, he said he would not appeal. The prosecutors may still decide to appeal. Uli Hoeneß resigned as president of the FC Bayern Munich soccer club and chair of FC Bayern Munich Inc.’s supervisory board.

Mr. Hoeneß’s salary tended to be about 10 million euros per year. The Vontobel account never had more than 150 million euros in it at one time.

(BY beh HALT oong.)

* Mr. Hoeneß said he netted 500 million euros between 2000 and 2012 by compulsively playing the stock market starting with a 10-million-euro combination gift/loan in 2000 from a now-deceased friend, a former C.E.O. of Adidas.

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02

Nov

Ehrenwort

Word of honor.

In the inquiry into the C.D.U. party’s underreporting and/or underpayment of taxes on large donations e.g. from the arms dealer and lobbyist Karlheinz Schreiber, former chancellor Helmut Kohl was asked where the money came from and said he couldn’t say because he’d given his “Ehrenwort” to some donors. And the matter of his criminal culpability was dropped. Some evidence went missing too.

Karlheinz Schreiber went to Canada where he got in trouble for making underreported donations to politicians.

(AIR en VORT.)

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27

Oct

Schattenhaushalte vieler katholischen Bistümer

Shadow budgets of many Catholic bishoprics in Germany.

An incident made the news which in turn made people aware that Catholic bishops in Germany appear to have large discretionary funds, sometimes, whose contents and disposition are not transparent.

The incident happened to be the scandalous new bishop’s residence in Limburg, originally approved for 2.5 million euros but now at 31 million and possibly costing up to 40 million ultimately as the digging and draining that proved so unwieldy and expensive for the site itself may turn out to be endangering the stability of historical buildings around it. Limburg has been settled since at least the Stone Age and has Roman ruins dating back to before the Roman empire became Christian in 380 C.E.

In tumultuous economic times, especially when Germans see more reasons to worry about their traditional issue of inflation, moving cash into real estate may be a wise investment. But the Limburg bishop’s motivations appear not to have been entirely practical ones. He was also caught subsequently perjuring himself about church finances, according to procecutors in Hamburg.

An ecclesiastical friend gossiped to me that the Limburg bishop’s shadow budget or discretionary fund was about 90 million euros because his predecessor was a saver.

In addition to reporting details about the bishop’s construction projects, which were hidden behind an expensive high stone wall and included designer gardens, conference rooms, housing for nuns (as domestic servants?), a chapel, the bishop’s own apartment and an underground relics room, reporters have also used this opportunity to explain the history of how Germany got to its strange semi-separation of church and state whereby the states collect a “church tax” and distribute it to the dioceses (income tax is collected state-by-state in Germany). After Napoleon invaded some German principalities and enacted legal reforms, in 1803 the so-called Reichsdeputationshauptschluss or “German mediatization” according to Wikipedia stripped the officially recognized churches of their property but set up annual payments—almost pensions—to the churches to compensate for the loss. Now, two hundred years later, the government still pays compensation [Staatsleistungen] to the bishoprics—my ecclesiastical friend said these obligations were eliminated for dioceses smaller than bishoprics during the last decade or so—for the church property technically confiscated in 1803. The state also pays churches Staatsleistungen for the social services the churches provide, such as day care. Also, anyone who ticks a box marking themselves as Catholic or Protestant on their mandatory registration form with the local police will automatically owe church tax [Kirchensteuer]. People voluntarily do this because they feel religious, they want to get married in a church in addition to the standard civil marriage in the town hall, or, especially, they are desperate for preschooler day care which was mandated but not provided in Germany until 2013, when actual penalties went into effect for towns that didn’t provide enough day care. Money for saving and maintaining wonderful old church buildings, bells and organs also comes from the state in these forms. Such income streams are how German cathedrals are kept heated in winter despite being giant stone piles with ceilings 20 meters above the floor ducts.

German news reported that the transparent public budget of German Catholic bishoprics includes taxpayers’ voluntary church tax [Kirchensteuer], collected and handed over by the government, for free, and the government’s own payments [Staatsleistungen, several hundred million euros annually] as rent on the property seized in 1803. Bishoprics’ untransparent private budget includes income from e.g. real estate, stocks, bonds, legacies willed to the church and interest income. ARD’s tagesschau.de reported e.g. that the Catholic bishopric of Würzburg said its private property was 271 million euros, and Cologne said it had 166 million euros. A political scientist and journalist disagreed with these numbers however, telling tagesschau.de that the Cologne diocese had three billion euros in cash and property, including an investment in a company that owned ~23,000 apartments, he told ZDF heute journal. The researcher, Carsten Frerk, published a 2010 book estimating annual subsidies of German churches at 19 billion euros and accusing churches of “false labeling” because, he said, nearly all the religious business they carried out was subsidized by government funds, taxpayers’ direct church tax and even N.G.O.’s such as Germany’s health insurance schemes. Mr. Frerk also noted that churches in Germany are exempted from paying property tax or tax on interest income and from many fees as well, while taxpayers can take church tax as a 100% deduction for which the government also receives no compensation.

Tagesschau.de reported that Hildesheim is the only Catholic bishopric that is fully financially transparent. Their books are published in their entirety, and kept according to the German Commercial Code [Handelsgesetzbuch]. ZDF heute journal reported that in the wake of the Limburg scandal 14 of Germany’s 27 Catholic bishoprics started publishing financial statistics about themselves that they hadn’t disclosed before.

To finally financially separate church and state in Germany, governments would have to make large 1803-concluding lump payments to the bishoprics which they feel they can ill-afford right now. Thus the situation continues.

Update on 09 Feb 2014: A report is expected soon from the Catholic church’s five-member commission investigating the financial scandal in Limburg. It doesn’t look good, said Spiegel.de. Construction costs of the bishop’s 2.5-million-euro residence will exceed the most recent estimate of 31 million euros. Some church foundation money [Stiftungsgelder] was diverted into the project; apparently this is mentioned because it was done improperly. Spiegel.de’s source used interestingly arcane words: The investigators managed to document possibly prosecutable [justitiabel] offenses, based among other things on information found in a “secret registry” [Geheimregistratur] found in a “conspiratorial apartment” [konspirative Wohnung] rented separately in Limburg, where the “most important documents” on the church construction project were found together with financial papers bearing the bishop’s signature which could be used as evidence. The commission’s report is supposed to go to the catholic bishops’ conference and the Vatican, but it would be nice if it were shared with the general public as well.

(SHOTTEN house halt ah   FEEL ah   cot OLE ish en   BISS toom ah.)

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31

Aug

Rüstungsfirmen wegen mutmasslichen Schmiergelder untersucht

“Razzias Searched Weapons Manufacturers for Evidence in Bribe Accusations.” Bremen prosecutors confirmed police had searched the offices of two German arms manufacturers on 23 Aug 2013 for evidence in corruption charges brought against the firms. Rheinmetall Defence Electronics and Atlas Elektronik are being investigated for paying bribes to Greek politicians and bureaucrats and for not paying taxes in sales of German submarine equipment to Greece.

Süddeutsche.de said it’s thought each firm paid Greek officials about 9 million euros in bribes or “Schmiergeld,” shmear money, lubrication funding.  The bribery charges go back a long way in time, in Atlas Elektronik’s case to before the current owners’ purchase of the firm. Payments were made to a British “letterbox” company that belonged to a Greek company.

Despite the British background in this investigation, there’s a long history of corruption in German submarine sales to Greece according to Süddeutsche.de. Munich prosecutors have been investigating it for years because an Essen company Ferrostaal caught paying bribes to Athens used to be owned by MAN SE, a transport vehicles manufacturing company based in Munich. Most of the extra Ferrostaal submarines sold to Greece via the shmear were built at ThyssenKrupp shipyards, and Bremen prosecutors say Ferrostaal involvement hasn’t been ruled out yet in the current investigation of Rheinmetall and Atlas.

Prosecutors of multiple German districts have known about these problems for years but reportedly only found enough evidence to take action in 2012. For example, the Süddeutsche wrote that EADS (now Airbus) and ThyssenKrupp are joint owners of naval electronics specialist Atlas Elektronik. After buying the company in 2006 from the British firm BAE, they stopped payment of the bribes in 2007, bribes that had apparently started with a consultant contract in 2002. Atlas informed prosecutors about it in 2010 but nothing happened until further info was received from a 2012 tax audit at Rheinmetall Defence Electronics, they said. Rheinmetall denies all bribery charges.

(RISS toongs firm men   vay gen   moot MOSS lichh en   SHMEAR geld ah   oont ah ZOOCHHT.)

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25

Aug

Amtshilfe

Administrative cooperation.

Switzerland said they will provide administrative cooperation to governments seeking evidence about tax cheats even if the governments are using “stolen” data. However, Switzerland said, it does not want to cooperate with governments that “actively” acquired stolen data (such as the German state of Rhineland-Palatinate, der Spiegel suggested) but will now cooperate with governments with which those “actively” acquired data have been shared.

(OMTS hill fah.)

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09

Aug

Alle Bürger sind in ihrer Würde gleich vor dem Gesetz, ohne Unterscheidung von Geschlecht, Rasse, Sprache, Religion oder politische Meinung

Fundamental rights defined in the current version of the Italian constitution read by a protester into a bullhorn before the Italian supreme court on the day that court upheld Silvio Berlusconi’s criminal conviction.

This might be from Art. 3, “Tutti i cittadini hanno pari dignità sociale e sono eguali davanti alla legge, senza distinzione di sesso, di razza, di lingua, di religione, di opinioni politiche, di condizioni personali e sociali.”

All citizens are in their dignity equal before the law, without differentiation of sex, race, language, religion or political opinion [or personal and social conditions].

(OLL ah   burgher   zint   in   ear ah   VOORD eh   gly chh   fore   dame   geh ZETS.)

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30

Jul

Im Quellenland Steuern zahlen

“Paying taxes in the source country.” The O.E.C.D. presented its post-Offshore Leaks report on 19 Jul 2013 and announced it wants to enact new rules forcing companies to pay taxes in the countries where the income is earned, disallowing the currently not-illegal practices that shift income to low-tax countries. The G20 countries supported this plan. A “golden era” of “tax arbitrage” may be ending.

Update on 06 Sep 2013: World leaders at the G20 summit in St. Petersburg agreed that in future corporate income will be taxed in the country where it is earned. It will no longer be possible to schubs income around the world, shopping for lower-tax jurisdictions.

(Imm   KVELL en lont   SHTOY ahn   TSOLL en.)

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27

May

Steuersparmodelle für Grossunternehmen angehen

“Having a go at tax savings models for large companies,” what the EU is doing now that US firms have started testifying before Congress about still-legal systems of international tax loopholes partially revealed by the “Offshore Leaks” data trove.

From the Süddeutsche Zeitung’s description of some results from the 22 May 2013 EU summit in Brussels:

“At their meeting Wednesday the 27 leaders also talked for the first time about actions to be taken against tax savings models for large companies. With an eye on corporations like Apple, Amazon or Google, which avoid taxes on a large scale, British leader David Cameron said it is time to close the loopholes. He said one has to be sure that companies are really paying taxes. France’s president François Hollande demanded action against the ‘corporations’ tax tricks.’ Irish premier Enda Kenny was put under pressure because for years Apple has been using Irish subsidiaries to save billions of euros. Kenny said there aren’t any exception rules for international corporations. Ireland’s rules for taxing companies are ‘transparent and clear.’ The EU commission now plans to submit proposals for closing corporate tax loopholes by the end of 2013.”

(SHTOY ah SHPAH mode elle ah   foor   GROSS oont ah NAME en   ON gay hen.)

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29

Apr

Cum-Ex-Geschäfte

“Cum/ex transactions.” A lucrative tax loophole that major German banks have been using. Spiegel reported the story on 28 Apr 2013, saying it had been broken by the Berlin Sunday version of Die Welt (Die Welt am Sonntag, WamS) but so far search results for it online are only turning up in Der Spiegel. The loophole, estimated to have cost the German government 12 billion euros so far, was created by corporate tax reform legislation of the SPD + Green Party coalition in 2002. Though discovered by officials shortly thereafter in 2002, and reported all the way up the chain of command, the loophole was not fixed by Hans Eichel (SPD) or his successor Peer Steinbrück (SPD, currently running against Angela Merkel for chancellor of Germany). Amendments to the law in 2007 made the situation worse, Spiegel reports that WamS reports. Wolfgang Schäuble (CDU) appears to have waited several years to fix the problem as well, though now the order appears to have gone out.

The problem was this: under certain circumstances capital gains tax could be reimbursed multiple times. After e.g. stocks or bonds were sold short but before they were bought back to conclude the transaction, German bureaucracy sometimes obscured to whom the stocks or bonds belonged: the person loaning the stock, the short seller or the end customer. The question would be trivial, say financial reporters, were it not for the fact that sometimes if the sale occurred right before a dividend the German IRS would erroneously issue more than one get-your-tax-back certificate for capital gains on the stock. Honest people would ignore the unearned get-your-tax-back certificate, but others would deliberately game the system to get the treasury to reimburse them these taxes even conceivably more than five times, said professor Heribert Anzinger of the University of Ulm.

This looks like the dividend stripping loophole HypoVereinsBank and others were reported in 2012 to have used to extract money from the German fiscus. Etymologically, Wikipedia contributors explain, when a company’s general assembly of shareholders decides to issue a dividend, the dividend is usually issued the day after the assembly meeting, called the “ex day” (“Ex-Dividende”). The day before the ex day is called the cum day, for arcane reasons.

(COOM   ECKS   geh SHEFF teh.)

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22

Apr

Fantastillionen

“Lots of money,” an “unimaginable fortune,” but no one knows how much yet. The Münchener Abendzeitung reported reports, firmly denied, of account balances totalling several hundred million euros. Uli Hoeneß, the president of German soccer’s version of the NY Yankees, FC Bayern Munich, submitted a Selbstanzeige in January 2013 for unpaid taxes on funds in one or more Swiss bank accounts and has already paid an initial lump sum of about six million in unpaid taxes. He said he didn’t report himself before January 2013 because he was betting the tax agreement with Switzerland would be ratified that provided amnesty, anonymity and a low tax rate for “tax sinners.” Tagesschau.de reports that it’s still unclear where the untaxed monies came from, whether from his bratwurst factory or from other sources.

ZDF heute journal found footage of Hoeneß on talk shows such as the charming Günther Jauch’s in autumn 2012 recommending low taxes for rich Germans because otherwise, he said, they would move to Austria, Switzerland or “who knows where.”

CSU chair Horst Seehofer confirmed on Saturday, 20 Apr 2013, at a CSU meeting in a Munich Hofbräuhaus cellar, that the district attorney was looking into the matter. The CSU had been going to propose Hoeneß as a political candidate, and he probably would have been confirmed.

The Münchener Abendzeitung commented on 20 Apr 2013:

“The question remains whether Hoeneß can now hope for the same support from the Bavarian state government as Franz Beckenbauer, to whom Bavarian finance minister Ludwig Huber once gave tips about tax flight into Switzerland while Huber was still in office?”

Achtung: Focus Magazin’s publisher is on the board of FC Bayern Munich.

(FAHN tossed ill ee own en.)

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19

Apr

Selbstanzeige

“Self reporting,” voluntary submission of an amended German tax return reporting money hidden in e.g. Switzerland. You can still report yourself to the German IRS, pay a low tax rate on the unreported funds, get immunity from prosecution and legally repatriate the money to Germany. The reason we know there are still Germans with Schwarzgeld, under-the-table or “black” capital, in Swiss bank accounts who have not taken advantage of the Selbstanzeige is because the German state governments, acting independently, buy CD’s of data about these accounts and use them to pursue tax sinners for fun and profits. The state of Rhineland-Palatinate recently bought another one, for the 500 million euros they expect to collect with its help and because no capital crimes were committed in the seller’s acquisition of it. ~200 apparently-related tax razzias took place on 16 Apr 2013. The RP finance minister is asking the other German states to show solidarity by contributing toward the purchase price because they too will be benefiting from the content. Lower Saxony has already announced they will contribute. Both states are ruled by SPD and Green Party coalitions.

The Selbstanzeige will soon be irrelevant because international negotiations are moving toward closing the loopholes, especially since publication of the “offshore leaks” financial data trove. Meanwhile, the Süddeutsche Zeitung writes in a wonderful history of bank account data sales to Germany, RP tax officials are “electrified” and say they’ve never had foreign bank account data this good before. “First class.” It sounds like enough years of transfers and other information are included that, after the tax authorities are done with it, the CD could form the basis of some interesting doctoral theses.

The top Rhineland-Palatinate tax agent now says he sees the recently failed tax agreement with Switzerland as disadvantageous, because it provides a partial amnesty and would destroy tax payment morale were it to be ratified now.

(ZELBST on ts eye geh.)

 

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15

Apr

Die Oasen der Anderen

“The Oases of Others,” a playful film reference in post-leak financial news reporting averring that countries seem more concerned about lax tax rules abroad than they are about their own tax loopholes (i.e., the USA and the state of Delaware).

Der Spiegel reminds us that quality and variety are better bets for future growth than competing internationally in a race to the bottom. There will always be countries with lower wages, so you are better off investing in education for your people and diversifying your industries.

(Dee   oh OZ en   dare   OND er en.)

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10

Apr

Generalsekretariat für Staatseinnahmen

“General Secretariat for Revenues,” a newly created department in the Greek government responsible for checking government income. Its head used to be in charge of the Greek General Secretariat for Information Systems (GSIS). In response to the “Offshore Leaks” data release last week, the Greek Revenues office will be investigating, among other things, a chain of offshore companies that have been providing military technology to Greece and the USA but whose actual ownership remains a mystery.

The Süddeutsche Zeitung reported: “Interoperability Systems International Hellas S.A. […] was co-awarded a 190-million euro order in 2003 for kitting out Greek F-16 fighter jets. The company also delivered hardware and software to the US Marines. In 2003, 33% of ISI belonged to Bounty Investments Ltd., which in turn owned part of another offshore company. Over that company there was a third veil as well. An attorney for ISI Hellas said Bounty Investments ‘fulfilled all requirements of the Greek tax authorities.’ Some experts think companies in the defense sector fundamentally ought not to be messing around in cloudy offshore waters.”

Update on 10 Apr 2013: This highly entertaining* SZ article about a British family that managed letterbox companies (Briefkastenfirmen) in New Zealand and includes Miami, Moscow, Pyongyang, Teheran and Vanuatu notes that it becomes impossible to trace ownership after only three to four “dummy companies” (Scheinfirmen). “After three, four dummy companies in a row the track gets lost in a thicket of commercial registers (Handelsregister, HRB).”

(Genn er OLL seck rett arr ee OTT   foor   SHTOTS eye nom men.)

 * highly entertaining until the deaths of two Russian reformers at the very end of the piece: Sergej Magnitskij (37) and Alexander Perepilitschnij (44).

 

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09

Apr

Pustekuchen!

Poppycock! In this video op-ed from the Süddeutsche Zeitung, a commentator says it might appear that the best way to reform the world’s tax oases would be to let each fix their own lax tax laws, one-by-one. But piffle! No! Those 40+ tax havens are in competition with one another. Max Planck Institute researchers said market pressures would mean the last holdouts would become too powerfully wealthy and resistant to change. The best way is the one that is most politically difficult: negotiating simultaneous agreements with all tax oases.

(POUSSE teh KOO chh en.)

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09

Apr

Bankgeheimnis

“Banking secrecy.” Luxemburg announced on 07 Apr 2013 that they intend to relax their banking code of silence, “no longer strictly refusing” to automatically share information about international accounts with other countries’ tax authorities, starting in 2015. EU countries have also been in negotiations with Switzerland about similar issues for several years, though individually as separate countries and not with the full power of the EU.

Until now, foreigners banking in Luxemburg have paid an anonymous tax of 35% on interest earned there. This will be changed in Luxemburg e.g so that account holders’ names will be included in the information shared with German tax authorities.

German critics say this is insufficient because other Luxemburg income, such as company profits, remains untaxed for foreigners. Also, Luxemburg isn’t the only European tax oasis. Jürgen Trittin of the Green Party criticized Austria, for example, where names of foreign account holders earning interest in Austrian banks are only shared after initiation of criminal proceedings. Green Party finance guy Gerhard Schick wrote that the G20 summit in 2009 actually agreed to end Bankgeheimnis; certainly some reforms were enacted that year though movement has been slow since, until the recent data leak. The ZDF report concluded by saying that economists have warned that if only some tax oases reform their laws, the ones that don’t will profit from acquiring fleeing customers.

Update on 09 Apr 2013: “In principle, Liechtenstein has separated itself from its tax haven past.” Speaking of Liechtenstein, it looks like they had an interesting idea for a new field for financial services experts in former tax oases to move into: ratings agencies that are independent of the big three on Wall Street. The nonprofit Carlo Foundation (carlofoundation.org), said to be the world’s first independent fund rating agency, was founded in Liechtenstein in July 2012.

Update on 22 May 2013: At their summit in Brussels all 27 EU leaders confirmed in principle their finance ministers’ decision to eliminate Bankgeheimnis for “foreign”-held bank accounts, insurance policies and investments starting in 2015. The leaders of the two last holdouts, Luxemburg and Austria, said they too would agree to the automatic exchange of data after the EU as a whole negotiated banking agreements with relevant third-party countries such as Switzerland, Liechtenstein or Monaco. Luxemburg’s prime minister Jean-Claude Juncker said his country is particularly concerned that the same competition conditions apply in finance centers inside and outside the EU. Negotiations with Liechtenstein, Monaco, Andorra, Switzerland and San Marino about automatic exchange of banking data are underway and expected to be concluded quickly, in “two to three months.” If all goes according to schedule, EU leaders could completely eliminate Bankgeheimnis at their meeting in December 2013.

Update on 20 Mar 2014: The 28 E.U. heads of government agreed to end Bankgeheimnis in the European Union, with comprehensive exchanges of tax data. This will also end banking secrecy for foreigners, though that might mean only for foreigners from other E.U. member states. Five third-party countries, Switzerland, Liechtenstein, San Marino, Monaco and Andorra, also agreed to exchange sufficient information to end banking secrecy de facto with regard to interest income, said Luxemburg’s prime minister, saying this fulfilled Luxemburg’s conditions for also agreeing to the new policy.

The O.E.C.D.’s standard for automatic data exchange will be the orientation point, and the E.U. hopes it will become the standard for tax information exchange regulations worldwide, said E.U. Council President Herman Van Rompuy. But today’s breakthrough E.U. policy agreement goes beyond the requirements of the O.E.C.D. standard:

“In future, the data exchange is supposed to apply not only to private persons but also to certain trusts and foundations. The guideline will also apply for stock profits and certain insurance profits, particularly from life insurance and investment funds. The banks are also to be obligated to collect more information in future about the actual economic owners of companies.”

(BONK geh HIGH mniss.)

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08

Apr

Partnermedium

Partner member of the media, what the Süddeutsche Zeitung is calling the other news organizations that received copies of the “Offshore Leaks” data trove. The SZ has posted a map showing the countries known so far to contain such media outlets and a list of the latest important discoveries.

(POT nah may dee OOM.)

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07

Apr

Durchgangssteueroase

“Pass-through tax oasis” or “flow-through tax oasis,” in a third country; also called a Vertragssteueroase (treaty tax oasis). The fierce discussion triggered in Germany by the publication of what is being called the  “Offshore Leaks” data trove on 04 Apr 2013 has moved from international tax avoidance by individuals, usually heirs in journalists’ examples, to international tax avoidance by companies, not least because these schemes do require a complex web of service providers and subsidiaries to move the money around. So, say your company earns income in a foreign country where your country has a double taxation agreement* with that country’s government not to tax it. As a first obfuscatory step, you can transfer this money to a Durchgangssteueroase, a third country that also has a nontaxation agreement with the country where you earned the income. The Netherlands is one of the world’s biggest pass-through tax oases because of agreements they’ve made with Asian countries that do a lot of manufacturing.

Income can thus be transferred out of high-tax countries to a pass-through tax oasis such as Mauritius to a zero tax oasis (Nullsteueroase) such as the Cayman Islands. Hans-Lothar Merten’s book “STEUEROASEN Ausgabe 2013: Neue Einblicke in die Offshore-Welt” explains that countries acting as pass-through tax oases justify being the first step in the chain by saying they are providing an important service in avoiding double taxation but, he says, what they are providing is in fact double nontaxation. ~20 trillion euros flowed through the Netherlands in this manner in 2012, Merten said [p. 29]. Ireland has provided useful related services.

German media are also reporting, or perhaps repeating each other’s examples of, perfectly legal situations where international companies’ foreign subsidiaries reduce their local net income by paying high licensing fees—for the rights to use their parent company’s brand—to subsidiaries in low-tax countries, perhaps while also deducting their expenses in high-tax countries.

(DOER chh GONGZ SHTOY er oh OZ iss.)

* Durchgangssteuerungsabkommen, “double taxation agreement,” “double tax treaty”: country A makes a (bilateral) agreement with country B to not tax income earned by country B people in country A. However, people who are residents of neither country can take advantage of the advantages by hiring an intermediary. The result is international flows of capital that are, writes Hans-Lothar Merten, inexplicable for any reason other than double taxation agreements and so-called “treaty shopping.” He cites the example of the island of Mauritius, which has double taxation agreements with ~50 other countries. Cyprus had them with ~45 countries, according to Wikipedia, with more in negotiation.

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06

Apr

Kapitalverschleierung über Steueroasen

“Using tax oases to veil capital.” Methods for doing this were disclosed by financial data about 130,000 people, in 170 countries, >120,000 “mailbox companies,” >260 GB in >2 million documents from a time range of ~30 years sent anonymously to the International Consortium of Investigative Journalists over a year ago. The story hit the world press on 04 Apr 2013. Greek and Filipino tax authorities announced that they will be investigating. The vice president of Mongolia‘s parliament will probably have to resign. Some of the still-legal methods to create tax opacity to be gleaned from the data were shown to have been used by the Deutsche Bank in Singapore, which had an intermediary agent (Trustverwaltungsfirma, “trust administrator company”) create >300 companies in so-called tax paradises (Steuerparadise).

In response: Gerhard Schick (Green Party) suggested Germany follow France’s example of levying an additional tax on all transactions with low-tax countries, disincentivizing tax flight (Steuerflucht) by neutralizing the advantages. Joachim Poß (SPD) proposed “an international anonymous NGO and a comprehensive information exchange, starting here in Europe.” The Leftists party proposed following the USA’s example of linking tax obligations to citizenship, so that every German residing abroad would be obligated to report “their total income every year, how much property they owned in total and what taxes they had had to pay for that in the Seychelles that year. And the difference between that and their German tax obligation” would then have to be paid in Germany, said Gregor Gysi (Die Linken).

The Süddeutsche Zeitung reported that they and NDR were the two German media outlets given access to the data (of “the biggest leak in world history”), and furthermore that a representative of Finance Minister Wolfgang Schäuble requested access to the data on Thursday, 04 Apr 2013, but the SZ would not grant that request. The data were protected under freedom of the press (Pressefreiheit), which includes protecting one’s sources, the Süddeutsche wrote. Sharing the data with government authorities might endanger those sources and obstruct the SZ’s ongoing research. NDR also refused the request to share the data. Now Focus magazine seems to have acquired the data somehow.

Update on 06 Apr 2013: “I have a certain degree of pleasure from the fact that this public scandalization in all countries has very much increased the pressure,” said German finance minister Wolfgang Schäuble with quiet satisfaction on 05 Apr 2013. “And now we have better chances to make progress faster than was possible in the past.”

Critics say the German finance minister has to be kidding because everyone’s known about this for years. If Schäuble were serious, they say, his office would be drafting new legislation. Income tax is regulated state-by-state in Germany, for example, and some people are calling for it to be centralized, made into a uniform federal-level taxation system with fewer “tax bait” niches. The OECD seems to be the locus for international negotiations in response to the new information; that group wants to issue a list of proposed actions in response to the “Offshore Leaks” data trove by July 2013.

(Cop ee TALL fer SHLY er oong   üüüberrr   SHTOY er oh OZ en.)

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30

Mar

Sektsteuer

“Sparkling wine tax.” In 1902 Kaiser Wilhelm created a champagne tax to help finance construction of the Kiel canal.

(ZECKED shtoy ah.)

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25

Feb

Rattenfängerei

“Rat catchery,” how departing Italian Prime Minister Mario Monti referred this week to billionaire media tycoon Silvio Berlusconi’s ridiculous campaign promise to pay voters’ real estate taxes out of his own pocket, hot air intended to encourage poorly-informed people to hitch their wagons not to a 21st-century democratic system but to a strong-seeming man no matter what ethics he displays.

(ROTTEN feng err EYE.)

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16

Feb

Finanztransaktionssteuer auf Wertpapiergeschäfte

“Financial transaction tax on securities transactions.” The responsible EU commission has submitted a draft proposal for a tax of 0.1% on transactions in stocks, loans, shares in investment and money market funds and derivatives in the EU, to be collected from large investors such as banks. Financial products for small investors are not going to be subject to the FTT. Some or all of the estimated >30 billion euros resulting from the tax will be used to bail out the large institutions paying the tax if new crashes occur in future, taking taxpayers off the hook for these institutions’ miscalculation of risks. The FTT will have to be approved unanimously by all EU countries before it can go into effect in Europe as scheduled on 1 Jan 2014.

Update on 12 Nov 2013: Apparently another English name would be a “Tobin tax,” named after Nobel economics laureate James Tobin. It’s a penalty he proposed decades ago on “short-term financial round-trip excursions” in order to “dissuade speculators.”

(Fee NONTS trons awk tsee OWNS shtoy er   ow! f   VAIR t pop EAR geh CHEF teh.)

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15

Dec

Umsatzsteuer-Karussell

“Value-added tax carousel.” On 12 Dec 2012 there was a razzia at the Deutsche Bank in which 500 finance police searched its offices and employees’ apartments in several cities for evidence of German Umsatzsteuer tax fraud for CO2 pollution permits sold abroad. Again, the scheme seems to have been to pass the paper back and forth across borders until it was unclear whether the tax due in Germany had been paid, after which the bank printed receipts saying it had and asked the German I.R.S. to refund, in this case, the 19% V.A.T. for the supposedly foreign transaction. Süddeutsche Zeitung described it as the government’s advance payment of V.A.T. to dummy companies that never paid it back and then evaporated. Trade in CO2 pollution permits shot up between 2008 and 2010, and the German fiscus refunded billions of euros to such schemes, according to the Bundeskriminalamt.

The Frankfurt general district attorney, who has been investigating this since 2010, voiced concern that Deutsche Bank employees, among other things, did not report suspected money laundering as they were required to. Germany’s largest bank, DeuBa garnered at least 230 million euros via the scheme.

The first razzia looking for evidence in this carbon emissions trading carousel scheme was carried out in April 2010 (and an unknown person warned the bank the day before). In December 2011 a decision by the Frankfurt District Court [Landgericht] listed instances in which the Deutsche Bank apparently did not care to ask questions about its business partners. Journalist Klaus Ott described some of them in an article in the Süddeutsche Zeitung dated 30 April 2012: “A business account for a furniture store that wants to engage in emissions trading? A business account for a company that doesn’t have any offices yet? A C.E.O. who doesn’t speak German but signs German-language bank papers with no prior translation? No problem! And what about the risk management documents of the company bringing in the new partner? The bank isn’t interested, even though it is well known that something stinks in this industry.” Spiegel-Online reported that in one case a ten-minute conversation sufficed to set up this million-euro deal. People behind the scheme appear to have been located in London.

Update on 20 Dec 2013: Europe’s carbon emissions market is merely ~100 billion euros, Süddeutsche.de wrote, but the continent’s “more vulnerable” “scarcely monitored”  electricity and gas market is about nine times as large. It looks like the carousel tax scheme has been used there too, by Germany’s third-largest utility company EnBW but they’re not the only ones. Europol said that “criminals” used the carousel to avoid ~5 billion euros in value-added taxes in the carbon emissions market, but that the tax fraud may have been correspondingly higher in the bigger market.

The alleged electricity trading carousel was set up quickly, growing very large very fast. At EnBW, for example, tax auditors either found or made an in-house note that in 2011 “tax-free sales increased from circa one billion euros to ten billion euros within one year.” Germany’s F.B.I., the Bundeskriminalamt, was quoted as saying setting up the scheme required specialist expertise and in fact looked rather “organized.”

Süddeutsche.de indicated they learned these details from internal confidential papers from e.g. tax auditors in Karlsruhe and a central corporate I.R.S.-type office in Stuttgart [Zentrales Konzernprüfungsamt Stuttgart]. Europol, German prosecutors from multiple cities and German tax officials from multiple states are said to be investigating.

(OOM zots SHTOY err   car OO! sell.)

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05

Dec

Steuerabkommen

“Tax agreement.” Germany’s ruling CDU/CSU + FDP coalition negotiated an agreement with Switzerland that untaxed German money in Swiss bank accounts could be subjected to a one-time tax (21% to 41%) and repatriated to Germany with no prosecution for tax evasion. This agreement had to be ratified by German parliament but was not because the SPD and Green Party objected to the low rates, saying tax avoiders would be granted immunity yet pay a lower overall tax rate than people who had obeyed the laws. The matter will now undergo arbitration.

Update on 06 Dec 2012: A tax agreement between Greece and Switzerland is under discussion that it is hoped would return 9 billion euros to Greece. Again, the tax evaders would pay between 21% and 41% and remain anonymous. Negotiations have been ongoing for two years. Süddeutsche Zeitung reported that over 20 billion euros were moved from Greece to Swiss banks between 2009 and 2011.

Gerhard Schick, finance speaker for the Green Party in the Bundestag, said in a position paper quoted in this Süddeutsche Zeitung article about the constitutionally anchored tax-free status of Greek shipping families that the EU should be negotiating these tax agreements with Switzerland, that the Swiss tendency to negotiate separately with each EU country gives Switzerland disproportionately too much power. “Divide et impera.”

Update on 12 Dec 2012: Arbitration was unsuccessful.

(SHTOY err OBB come en.)

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04

Dec

Dividendenstripping

“Dividend stripping.” A tax avoidance scheme the HypoVereinsBank is accused of, wherein they allegedly transferred customers’ stocks back and forth between German and foreign banks until it was unclear whether the Kapitalertragssteuer had been paid and then claimed more capital gains tax credits than were owed. Reuters and the Süddeutsche Zeitung reported that a single Frankfurt investor working with HVB and other banks was told he owed 124 million euros in tax for 2006–08 after the IRS-equivalent refused to accept his capital gains tax break from the scheme; he has been fighting in court since 2011 to get HVB to pay the tax bill. HVB and this investor split the profits 65% HVB, 35% investor. Wikipedia says dividend stripping lost its tax-law basis in 2000, Spiegel says it hasn’t been accepted by German tax authorities since 2007, and Süddeutsche Zeitung says since 2012.

Weird story about the HypoVereinsBank in Spiegel-Online on 30 Nov 2012: A guy accused his ex-wife and other HVB employees of large-scale tax avoidance schemes that moved money to Switzerland, was declared non compos mentis by the Bavarian justice system and has been locked up in a mental institution ever since (2006). The man probably was violent, but he may have been correct about the tax avoidance. He cited names and numbers when he blew the whistle to the Bavarian tax authority, but a judge who was not involved in that case called the tax office and told them not to investigate the bank because the whistleblower was crazy. The institutionalized whistleblower’s case was re-opened in 2013. He was set free  in the summer of 2013, after seven years of confinement. Laws committing people to mental institutions and keeping them there are going to be reformed as a result of his case. This started with an 05 Sep 2013 decision by the supreme court in Karlsruhe, the Bundesverfassungsgericht, which prioritized a review of the whistleblower’s case and announced failures of the various state courts and criteria that need to be met in future.

The Frankfurt district attorney’s HVB razzia last week found a trail leading to “a Swiss private bank.” Süddeutsche Zeitung says it is thought that Swiss banks will be a very fruitful place to investigate this German tax scandal. Deutsche Bank and UBS are now implicated as well.

Update on 16 Dec 2013: HSH Nordbank has been accused of dividend stripping.

(Dee veed END en shtrrrip pink.)

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04

Nov

Schwarze Null

“The black zero,” meaning a balanced budget. The federal government is saying it’s possible Germany may manage to have a budget with no deficit spending as early as 2014, although this may not be as true after the upcoming German election.

(SHVORTS eh   NOOL.)

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11

Oct

Ökostromumlage

“Environmentally-friendly electricity contribution” or “share in the costs”; this is a subvention to build more solar and wind power-generating capacity in Germany. Paid by electricity consumers, this contribution will probably increase in 2013 from ~3.6 to ~5.3 eurocents/kWh, or by an additional ~60 euros per average German household.

On 07 Oct. 2012 the president of the German Federal Cartell Authority asked for this contribution to be modified because he said it will soon be as high as the price of electricity on the Exchange.

Angela Merkel’s coalition partner, the libertarianesque FDP, advertises itself as a party that lowers taxes and deregulates in the interest of simplification (though it appears to me they have trouble finding projects that do this while actually simplifying and while actually benefiting average voters and not e.g. rich people). The FDP has now called to reduce value-added tax on electricity as compensation for the Ökostromumlage. Angela Merkel’s environmental minister (CDU) disagreed, saying he first wanted to find out how their partner party would compensate for the lost budgeted funds. The Green Party said it refuses to lower subventions for alternative power sources.

Update on 10 Oct 2012: Angela Merkel’s environmental minister (CDU) is now calling for a new Ökostromumlage law.

Update on 21 Oct 2012: Tagesschau.de reports that an internal SPD paper is also calling for a value-added tax rebate on electricity. The paper also calls for student allowances (BAFÖG), the base welfare income for people seeking work (Grundsicherung für Arbeitssuchenden, EUR ~690/month) and housing allowances (Wohngeld) to be “adjusted” for the electricity contribution increase.

(ÖÖÖ koh strome oom log eh.)

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11

Sep

Ägide

Aegis.

The Erfurt committee investigating the cell of neonazi serial murderers who only got caught posthumously (after they decided to commit suicide while setting their apartment on fire) has invited Helmut Roewer back to answer difficult questions about how Thuringian Verfassungsschutz paid ultimately-unhelpful neonazi informants 1.5 million euros in cash under Roewer’s aegis. 1.5 million is a lot to be unaccounted for or misspent in German government. Roewer was in charge of the state Thuringian Verfassungsschutz office from 1994 to 2000.

Roewer also appears to have personally made unusually high information payments to a “Günther” who was known only to Roewer and does not appear in the agency’s other files. Tax authorities have been asked to look into whether all V-people payments were properly reported on individuals’ income tax returns, as income to social welfare offices, and by Thuringian Verfassungsschutz as outgo.

If I understand this correctly, in 2006 Germany’s federal government ruled that informants receiving money from Verfassungsschutz and the Bundesnachrichtendienst owe 10% tax on those monies. Normal tax rates would range between 15% and ~42%.

(Ague EE deh.)

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