Tax deal rejected

Swiss efforts to convince Germany's states of a bilateral draft tax agreement between Bern and Berlin amounted to nothing on Thursday when the southern German state of Baden-Württemberg rejected the federal government-negotiated accord lock, stock and barrel after a final round of talks with Swiss officials.

"The agreement brokered by the federal government is not acceptable to us," Baden-Württemberg's coalition of Greens and Social Democrats said in a statement in Stuttgart, thus joining other states which have been against the proposed deal and making approval by the upper house of parliament next week extremely unlikely.

States run by the Greens and Social Democrats have argued the bilateral tax agreement would leave too many loopholes for German tax evaders placing their money in Swiss bank accounts.

Revealing the weak spots

The tax accord was to come into effect on January 1, 2013, and would have obliged Swiss banks to collect tax from German investors and transfer it to Germany, with the emphasis being on levying a tax of between 21 and 41 percent on illicit earnings, depending on how long the money has already been in Swiss bank accounts.

But critics of the deal have argues that the agreement does not go far enough as the names of German tax evaders would not have to be revealed by Swiss lenders. They've also maintained that with that scope of anonymity still in place, evaders could potentially remain just that by shifting their deposits to other tax havens.

Baden-Württemberg's regional government also appeared resolved to overturn the draft agreement because recent investigations by a regional court in Mannheim had found that staff from the Swiss lender UBS had actively helped Germans transfer their untaxed money to Switzerland.

"It has to be clear to Swiss banks that they can't make any more money out of tax evasion in Germany," Baden-Württemberg's Finance Minister Nils Schmid told reporters.

hg/mz (dpa, Reuters, AFP)