Germany's upper house of Parliament rejected an accord with Switzerland aimed at resolving a dispute over tax evasion by Germans with undeclared bank accounts in the Alpine country.
The Bundesrat, controlled by the opposition parties after state election losses by Chancellor Angela Merkel's Christian Democrats, voted to block the agreement signed by the two nations last year.
The exact result of the vote today in Berlin wasn't disclosed.
The collapse of an accord that would have imposed a withholding tax on offshore accounts held by Germans is a setback for Swiss banks as they try to stem withdrawals by European customers concerned about a widening hunt for tax dodgers.
Germany's opposition Social Democratic and Green parties have said the agreement contains too many loopholes for tax evaders and keeps client identities secret.
Thomas Schaefer, finance minister of Hesse state, said in a speech to the Bundesrat today that Germany may lose €13 billion in tax revenue next year without the treaty accord.
While the German Parliament may discuss the matter again in a mediation committee tasked with finding a consensus across the two houses, the Social Democrats will continue to oppose the initiative, Steffen Rulke, a Berlin-based spokesman for the party, said November 21.
Switzerland built the world's biggest offshore wealth centre during an era of "black money" that started to crumble when the US sued UBS three years ago.
The so-called Rubik accord with Germany would have retained an element of banking secrecy, even as a crackdown on tax evasion by the US and European authorities leads to demands for more transparent arrangements, including automatic exchange of information.
Switzerland signed the bilateral agreements with Germany, Austria and the UK after agreeing in March 2009 to meet international standards and avoid being blacklisted as a tax haven by the Organization for Economic Cooperation and Development.
The UK and Austrian accords were ratified earlier this year.
The proposed German deal involved a tax of 21 per cent to 41 per cent on so-called legacy assets from the past.
US and European authorities are analysing information from thieves, whistle-blowers and client disclosures to probe the alleged role of Swiss banks in fostering tax evasion by wealthy customers.
Bloomberg
