[A-List] Germany: fiscal crisis

["Michael Keaney" <michael.keaney@xxxxxx>]

Schröder entices German tax-dodgers to bring home their money
By Thomas Sigmund
The Independent, 17 December 2002

German Chancellor Gerhard Schröder has announced plans for an amnesty for
tax-dodgers in a bid to lure back as much as ?100bn (£64.4bn) hidden in
foreign bank accounts.

It's hoped the cash will boost government revenues badly hit by rising
unemployment and falling living standards. "We want to allow those who have
not been honest a way back into the system," the embattled Chancellor said
after a meeting of his ruling Social Democrats (SPD) in Berlin.

The plan will involve cutting tax on savings interest and granting immunity
from prosecution for people who repatriate money from accounts in Luxembourg
Switzerland and Liechtenstein.

For Mr Schröder, the plan offers a chance to end a damaging debate over a
proposed new wealth tax that has helped demolish his personal popularity.
With this year's budget deficit set to exceed the European Union's ceiling
designed to protect the euro, the government is also seeking to boost
revenue to avoid overstepping the limit next year.

The target of the tax reforms is wealthy Germans who have secret accounts in
other countries. Until recently Hans Eichel the Finance Minister had
rejected calls for an amnesty on the grounds it would be unfair to honest
taxpayers. Interest income is currently subject to personal income tax rates
that can be as high as 48.5 per cent. Under the new plans money repatriated
in 2003 would be taxed at 25 per cent in 2003 and at 35 per cent from
January until June 2004.

"A lot of Germans would want to bring back money invested abroad in the past
decades to recover it from the gray market," said Ulrich Ramm, chief
economist of Commerzbank AG, Germany's fourth-biggest bank. "If it works, so
much the better."

Rolf Peffekoven, former member of the council of economic advisers, rejected
the amnesty proposal: "You shouldn't reward tax evasion and I doubt that the
government will get the expected amount of money."