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German gov't agrees measures to fight tax evasion.

Summary: BERLIN - The German government agreed measures on Wednesday to allow it to penalize tax evaders in other countries on their operations in Germany, the finance ministry said in a statement.

The new law which will come into effect in 2010 pending approval by the German Bundesrat, or upper house, gives the government the power to withdraw tax allowances from individuals and entities registered in other countries that it deems are not cooperating in the fight against tax evasion.

On Wednesday Finance Minister Peer Steinbrueck said that the new law will bring 'more fairness and strengthen trust in the state.'

'Whoever evades tax damages society. A small minority causes great damage to the majority,' Steinbrueck added.

Three states bordering on Germany, (Austria, Switzerland and Luxembourg) had been placed on the OECD's so-called 'grey list,' which names states deemed not be fully implementing international accords on tax evasion.

In March Germany and Switzerland traded barbs over the issue of tax evasion, with Steinbrueck saying that tax-havens were 'like Indians' with the cavalry bearing down upon them.

In June Steinbrueck led a conference of OECD states in Berlin in a concerted effort to tighten the screws on tax havens.

At the Berlin conference, Swiss Finance Minister Hans-Rudolf Merz informed Germany that Switzerland would comply with Article 26 of the OECD Model Tax Convention, meaning they would now provide assistance on tax evasion cases.

Steinbrueck said Wednesday that those states that continue to not cooperate with OECD standards on tax evasion should be put on a list, and German law should be brought to bear on their operations in the country.

The Finance Ministry under Steinbrueck had attempted to make itself responsible for naming those entities deemed not in cooperation with the OECD standards, but had been forced to retreat by complaints from the business community.

The ministry will now cooperate with the German foreign and economy ministries to draw up a list of tax evaders.

The law could be approved by the Bundesrat as early as September 19.

Switzerland wants to seal double taxation agreements with at least 12 countries by the end of the year in order to be removed from the 'grey list.' In June it announced that it had reached agreement with the US.

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Publication:Khaleej Times (Dubai, United Arab Emirates)
Geographic Code:4EUGE
Date:Aug 6, 2009
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