German Finance Minister Wolfgang Schaeuble said on Friday he was glad the identities of thousands of holders of bank accounts in tax havens had been leaked because it would help do away with a business model that Cyprus had shown was flawed.
“I’m glad about this report, which will increase the pressure,” he said, referring to a report by the Washington-based International Consortium of Investigative Journalists (ICIJ) in cooperation with some international media.
The investigation, titled “Secrecy for Sale”, details what it calls “complex offshore structures” used by wealthy people from all over the world, including government officials and their families. The German media says these include hundreds of Germans.
It has received major media coverage in Germany and France, where President François Hollande’s former campaign treasurer was reported to have had joint ownership of two firms registered in the Cayman Islands, a Caribbean tax haven.
The ICIJ report said international banks have “aggressively worked” to help wealthy clients use offshore banking facilities in tax havens like the British Virgin Islands. This prompted a response from Germany’s biggest bank, Deutsche Bank, defending the legality of its wealth management services.
Schaeuble told German radio it remained to be seen how much of the activity revealed by the ICIJ was actually illegal, “but much of it is at least a grey area”.
Berlin has taken a leading role in getting international bodies like the G20 and Organization for Economic Cooperation and Development (OECD) to define clearly which countries were acting as tax havens and then ensure that “legal consequences are brought to bear”, he said.
The minister cited the example of euro zone member Cyprus, which was forced by its partners, led by Germany, to impose significant losses on depositors in its big banks in exchange for a €10 billion [$12.94 billion] EU bailout.
The island nation has attracted large deposits from wealthy foreigners, particularly Russians, with low taxes and loose regulations.
“We don’t like this business model and we hope it is not successful and when it becomes insolvent as in Cyprus, they can’t expect it to keep being financed,” said Schaeuble.
“In the case of Cyprus we have leverage that we don’t have with other tax havens, but when a euro member’s banks become insolvent they can’t expect other countries to make their banks solvent again,” said the minister.
Schaeuble’s predecessor Peer Steinbrueck, who led the charge against tax havens in the previous German government and is running against Chancellor Angela Merkel in a September election, urged stronger sanctions against banks that were complicit in tax evasion.
“In extreme cases, it could also lead to them losing their banking licenses,” Steinbrueck said in a statement released by his Social Democrats (SPD) on Thursday.
Schaeuble said Germany would push the EU to take legal measures against tax havens “without waiting for the last island in the Caribbean to introduce the relevant rules”.
But he added that the EU’s own willingness to act had proved limited in the past with some member states reluctant to provide information about taxpayers and two of them – Luxembourg and Austria – “who still have special rules” about such disclosure.
Austria and Luxembourg are the only countries that do not share with other EU members the identities of EU residents with cross-border bank accounts. The crisis in Cyprus has cast doubt on whether their systems are sustainable.