Tax Row The Spy Who Came in from... Switzerland

German authorities have arrested a Swiss spy in a tax evasion scandal that is rattling the country's rich and damaging relations between the two neighbors.
It's not exactly James Bond, but the Swiss spy scandal has caused upset in Berlin and Bern.

It all sounds so unlikely, even for an airport thriller story. Why would boring and peace-loving Switzerland want to spy on its larger, friendly neighbor Germany? The answer, of course, is money and power.

A Swiss agent allegedly not only spied on officials at the finance ministry in Germany’s largest state of North Rhine Westphalia, but also planted an informant there, according to media reports this week. His goal was to find out which German tax investigators were involved in the controversial acquisition by NRW of CDs containing lists of wealthy German tax dodgers with Swiss bank accounts.

The NRW government started purchasing CDs containing the details of thousands of suspected German tax frauds with Swiss accounts in 2010. It prompted thousands of evaders to come forward in NRW alone, and also led to raids on several German clients of Credit Suisse. The Swiss believe the purchase of the CDs is a gross breach of privacy.

The latest scandal has caused uneasiness in both Germany and Switzerland. NRW Finance Minister Norbert Walter-Borjans, a member of the center-left Social Democratic Party (SPD), was blunt in his assessment of the allegations. "It is hard to imagine that this type of spy thriller is not playing in the movie theater, but is in fact unfolding at our doorstep," he told Handelsblatt.

I am anxious to see how the Swiss intelligence service explains such behavior. Norbert Walter-Borjans, Finance Minister, North-Rhine Westphalia

He indirectly accused the Swiss intelligence agency, the NDB, of facilitating tax evasion. He said the case shows "how strong the defenders of the business model of tax evasion and facilitating it still are. I am anxious to see how the Swiss intelligence service explains such behavior."

Martin Schulz, the SPD’s candidate for chancellor in Germany’s September general election, was also alarmed: "I think this is a far-reaching process," he said on Thursday. The case, he added, shows that the fight against tax fraud must be continued.

German news outlets broke the story this week. According to their reports, a Swiss agent involved in the placing of an informant in the NRW ministry, named Daniel M., was arrested last Friday in Frankfurt. The source was allegedly to provide "direct information" about how German authorities go about purchasing the tax CDs. Thomas Schäfer, the finance minister in the neighboring state of Hesse, told Handelsblatt: "If this is true, it would not be sustainable. Tax investigators have seen a lot, but this would be a new twist."

Federal parliamentarians are also concerned. "If Switzerland wants to defend its illicit funds business model with intelligence tools, this is unacceptable and would burden the bilateral relationship," said SPD deputy parliamentary group leader Carsten Schneider. According to him, Switzerland is still upset that a proposed tax amnesty agreement between Germany and Switzerland did not materialize. "With this agreement, Germany would have lost several billions in misappropriated tax payments and many fraudulent cases would have remained unpunished,” he said in defense of Germany’s move.

The German finance ministry is also interested in getting to the bottom of the case, although it is unwilling to comment on the recent events. On Wednesday, the federal government stated that it had summoned the Swiss ambassador for a meeting on the subject.

According to media reports, Daniel M. was asked to gather a list of the names and personal information of German tax investigators, with the aim of discovering those involved in the purchasing of CDs. The information he passed on was reportedly the basis of several arrest warrants issued by Swiss courts against German tax investigators, in which accusations of economic espionage and violation of bank secrecy were made. The operation is apparently controlled by officials at the top of the Swiss intelligence agency.

Markus Seiler, the director of the Swiss agency NDB, said on Tuesday that his agency's objective is to prevent "someone from stealing secrets by illegal means." If someone in Switzerland used illegal methods to acquire state or business secrets, it would be espionage, he added.

To complicate matters, Daniel M. is also reportedly under investigation in Switzerland, accused of selling Swiss bank data to Germans. He denies the charges.

The black-market purchase of tax-evader CDs from Switzerland and Liechtenstein by German states, sometimes for millions of euros, has been going on since 2006. According to the finance ministry, this resulted in additional tax revenues of an estimated €6 billion to €7 billion ($6.6 billion to $7.7 billion) nationwide, including €2.4 billion in NRW alone since 2010. Approximately half of the increase in revenues resulted from voluntary declarations of tax liabilities. According to an overview of the NRW tax administration, the other half consists of fines against banks, additional taxes, financial penalties and fines.

For several years now, the process has adversely affected relations between Germany and Switzerland, but it was also recognized by the highest German and European courts as legally justified. However, Germany and Switzerland have agreed a comprehensive exchange of tax data beginning in 2018, explaining why there are currently so many cases of people who want to come clean with their taxes.


Handelsblatt reporters and editors Ozan Demircan, Volker Votsmeier, Martin Greive, Christoph Herwartz and Frank Specht contributed to this story. To contact the authors: [email protected]