CAN THE end justify the means? Yes, when the end is to detect and prosecute tax evaders and the only means is to pay a €4 million bribe to a whistleblower for information to secure a conviction and to recover unpaid tax.
The German tax authorities have just done so and they have acted correctly. For, most likely, the revenue yield will be many times the initial financial outlay and wealthy tax cheats will be punished for their crime. Sometimes, tolerance of a lesser evil - bribery - may be necessary to achieve a greater social good, a law-abiding and tax compliant society.
Germany's intelligence service paid for the offshore banking details of 750 wealthy Germans last month. They had, allegedly, opened secret bank accounts in Liechtenstein to evade tax on an estimated €4 billion invested there. The German authorities have now offered other countries access to the names and account details of those non-German taxpayers on the whistleblower's list. The Revenue Commissioners will, shortly, seek information on Irish tax residents who may have used the Liechtenstein banking facility. The US, Britain and nine other EU countries are also planning tax inquiries.
Liechtenstein, a tiny principality situated between Switzerland and Austria, is a notorious tax haven. The country, with Andorra and Monaco, are the only three European states that the OECD has categorised as facilitators of tax evasion, via low tax regimes, strict bank secrecy rules and a refusal to co-operate in the international battle against tax evasion. The fallout from the Liechtenstein tax scandal, however, has proved far reaching. Some tax havens, anxious to restore their battered reputations, are having a change of heart. Monaco, which has some 40 banks and 300,000 accounts for a population of 30,000 and was once memorably described by Noel Coward as a "sunny place for shady people" this week promised to help the German tax investigation.
The use of tax havens is a major global problem. Greek residents are estimated to hold some €25 billion abroad in illegal offshore accounts. In Ireland, some €2.4 billion has been collected by the Revenue following investigations into bogus non-resident accounts and other illegally held offshore assets. Tax fraud is theft. The tax compliant are the victims of tax cheats. Germany's bold step in tackling tax evasion, however unsavoury the method, is to be applauded.