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Berlin to buy stolen Swiss tax dodger data

Germany said Tuesday it would pay for data on some 1,500 suspected tax dodgers with funds stashed in Swiss accounts, waving aside concerns that the allegedly stolen material would not stand up in court.

Berlin to buy stolen Swiss tax dodger data
Photo: DPA

Finance Minister Wolfgang Schäuble gave a green light “in principle” to stumping up a reported €2.5 million ($3.5 million) to an anonymous whistle-blower for a disc that could net the taxman around €100 million.

In an interview with the Augsburger Allgemeine regional daily, Schäuble said: “There was no other decision we could have taken” after a 2008 legal precedent whereby Germany paid for tax data from Liechtenstein.

He added that the government felt it was on solid legal ground as no court had yet questioned the validity of the Liechtenstein data.

However, the Financial Times Deutschland reported that Germany’s constitutional court was already examining whether these data – which resulted in the taxman clawing back some €180 million – were admissible.

Analysts too said judges could throw out information obtained in this manner.

Tobias Singelnstein, a professor of law at Berlin’s Free University, told news agency AFP: “It is a bit absurd to prosecute a breach of the law by ourselves breaking the law.”

The affair, which was splashed on the front page of most German newspapers, has also raised the moral question over paying for “stolen” information and has soured Germany’s relations with its Alpine neighbour.

Defence Minister Karl-Theodor zu Guttenberg, a member of the Bavarian sister party of Chancellor Angela Merkel’s conservatives, said he would have a problem with using data that was obtained by legally questionable methods.

One prominent legal expert quoted in the Financial Times Deutschland also warned that the government’s purchase of this data could prompt copycat thefts.

“To buy stolen data for a second time is a clear incitement. The state is creating a climate in which every Tom, Dick and Harry will feel the urge to steal data from his employer,” Erich Samson was quoted as saying.

The public and the press were also divided by the saga. A poll by Stern magazine released on Tuesday showed a solid majority of Germans – 57 percent – in favour of buying the names, with 43 percent opposed.

The Frankfurter Allgemeine Zeitung daily described the disc as “forbidden fruit” and said the government “should not deal with data thieves.”

On the other side of the fence was mass circulation daily Bild, which wrote

in an editorial: “It is right and sensible that the chancellor spoke out so quickly in favour of buying the information. The federal government’s message is crystal-clear: if you evade taxes, your number is up.”

What was also crystal clear is that Berlin was facing an increasingly vitriolic diplomatic showdown with Switzerland, which views the saga as another attack on its cherished tradition of banking secrecy.

A spokesman for the Swiss Banking Federation, Thomas Sutter, called into question the ratification of a tax treaty between the two countries.

“The German side cannot support a criminal act and then enter into negotiations with Switzerland,” Sutter told the Frankfurter Rundschau.

Pirmin Bischof, a Swiss lawmaker, said: “The relations between Germany and Switzerland will clearly not be helped if Germany buys these data.”

“This is a new form of bank robbery. Before, you had to go into the bank and extract the money using a gun. Today, you can do it electronically by stealing data,” he told German radio.

The Swiss Finance Minister has warned Germany that it would not provide administrative assistance on any tax inquiry based on stolen data.

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MONEY

What to know about investing in cryptocurrency in Germany

Germany has been dubbed the most crypto-friendly country in the world. We break down why that is, and what you should know about cryptocurrency in Germany.

What to know about investing in cryptocurrency in Germany

As with all of our financial and tax summaries, this is a guide on regulations only. For financial advice which is personalised to your situation, please contact an accountant or other specialist. Please note also that EU financial regulators have warned that many crypto-assets are highly risky and speculative. Find out more information here.

At first glance, Germany seems an odd place to be a cryptocurrency haven. Only 17 percent of people in Germany invest – way behind the percentages seen in other countries – which may go some way towards justifying the country’s reputation as a land of risk-averse savers.

Cryptocurrency, often called crypto for short, is considered by many investment analysts to be one of the riskiest and most volatile investments a person can own.

Concerns have also been raised over the environmental impact of cryptocurrencies.

There are countless types of crypto on the market these days. What each one has in common is that it is digital and secured using cryptography, meaning they can’t be counterfeited. 

Even the three biggest and most well-known cryptocurrencies – Bitcoin, Ethereum, and Ripple – are prone to huge sudden spikes and falls in value. It’s also a market that has seen some, like the LUNA cryptocurrency last month, crash completely.

Yet, bucking national stereotypes, Germany has some of the most favourable laws in the world for investing in these high-risk assets.

READ ALSO: What you should know about investing in Germany

Germany’s crypto tax advantages

Crypto exchange comparison site Coincub recently named Germany as the world’s most crypto-friendly country, with Singapore and the United States rounding out the top three.

A big reason for this comes down to favourable tax laws. Normally, when someone in Germany sells a regular stock or ETF asset at a higher price than they bought it for, their brokerage will automatically withhold 25 percent of their gain in tax.

Euro notes bitcoin coins

Euro notes and bitcoin coins on a laptop. Photo: picture alliance/dpa/dpa-tmn | Christin Klose

But following tax guidance issued by the Federal Ministry of Finance last month, certain gains in cryptocurrency could face absolutely no taxation at all.

Firstly, the ministry has affirmed that any profit of less than €600 faces no tax. More significantly though, cryptocurrency that someone in Germany has held for at least a year faces no tax at all – no matter how big the gain is when that person sells it.

Why is the law so favourable in Germany?

One variable is political. The liberal Free Democrats tend to attract a sizeable number of votes from the very demographics more likely to hold crypto. While the FDP is in a three-way coalition with the progressive Social Democrats (SPD) and the Greens, FDP leader Christian Lindner currently holds the German Finance Ministry.

During the 2021 election campaign, Lindner made regulating and attracting crypto investment a big part of the FDP platform and coalition negotiations.

“I think the German government understands how to make money better than a lot of other countries,” says the man behind crypto Youtuber The Modern Investor, a channel with over 225,000 subscribers.

“A lot of people in the crypto space are very internationally mobile,” he tells The Local. “If they choose to live in Germany for the favourable investing conditions, they’re going to be spending money in German supermarkets and buying German services. The money the government misses out on in taxes tends to go right back in the system.”

“If cryptocurrencies continue to take off globally, Germany will eventually be seen as a genius for figuring out how to attract this money and keep it within its borders,” he adds.

Germany’s crypto niche to go mainstream?

Cryptocurrency is still a niche investment in Germany. While only 17 percent of Germans own stocks, only about 2.6 percent own cryptocurrency.

German crypto investors typically skew younger, with a third of all German crypto investors being 34-years-old or younger. The more a person makes, the more likely they are to hold crypto as well, with two-thirds of all German crypto investors earning €800,000 a year or more.

That narrow niche is still big within the crypto community itself though. Around nine percent of the world’s Bitcoin nodes – the computers that run the secure list of transactions using that currency on a digital ledger known as the blockchain – are in Germany, and 14 percent of Ethereum nodes, another major cryptocurrency. That’s second only to the US.

Cryptocurrencies

A tablet screen displays the value of various cryptocurrencies in the Coinbase app. Photo: picture alliance/dpa | Fabian Sommer

Yet, while German ownership is still small, the community is visible enough to make others curious. That goes for even the traditionally risk-averse savings banks, or Sparkassen – where many Germans park their savings. The Savings Bank Association says around 10 percent of its regular customers already hold cryptocurrency, leading them to start offering customers the chance to invest in a crypto wallet directly from their checking accounts.

Many of the online brokerages popular with Germany-based investors, such as Trade Republic, Scalable, and DKB, also offer cryptocurrency wallets alongside their options to buy more traditional products like stocks and ETFs. Using their smartphone apps, crypto can typically be bought and sold with a few short clicks.

READ ALSO: How to protect your savings against inflation in Germany

The Modern Investor says that’s part of a culture that’s increasingly viewing crypto as just another normal part of the investing landscape. While crypto suspicion is still high globally, Germany has simply chosen to accept that crypto is here to stay, and has decided to benefit from it. 

“Germany has been one of the very few countries that have actually put forth cryptocurrency regulations. So a lot of internationally mobile investors have run to Germany as a bit of safe option,” the Youtuber says.

“Many countries don’t have any regulations at all. That makes things even less predictable. What happens to a crypto investor in the US or China if either of those countries simply ban it tomorrow? With Germany, people know that’s simply not going to happen now.”

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