I have long advocated that the United States should follow Germany’s example of aggressive pursuit of tax evasion, in particular its practice of paying informants for account information from secrecy destinations like Liechtenstein and Switzerland. The German Parliament’s upper house (Bundesrat) rejected a deal in November that Prime Minister Angela Merkel was willing to sign with Switzerland that would have allowed German account holders to pay tax anonymously. (As I reported on April 12, automatic exchange of information is rapidly becoming the standard to which even Luxembourg will adhere, so Switzerland will come under great pressure to do the same, thus ending bank secrecy.)
Now, Naomi Fowler of Tax Justice Network points me to new enforcement actions based on leaked account information. Last week the southwest German state of Rhineland-Palatinate conducted searches of over 200 homes in connection with alleged tax evasion. The raids were based on a CD with data on thousands of German citizens with Swiss bank accounts, for which the state had paid an informant 4 million euros ($5.2 million). However, tax authorities estimated that they would have an over 100-fold return on this investment, expecting to collect 500 million euros ($654 million) as a result of the investigation.
Investigators in Rhineland-Palatinate stated that they were investigating Credit Suisse and its German subsidiaries for assisting in tax evasion as a result of data on the CD. This comes on top of a 2011 settlement by the bank to pay 150 million euros for facilitating German tax evasion.
How often do governments get a 100-fold return on investment? The U.S. routinely pays drug informants; it should be more aggressive in finding tax evasion informants.
Cross-posted at Middle Class Political Economist.