Germans lose if tax deal rejected, says banker

A top Swiss banking official says that Germany would lose out if Berlin voted against a deal to end long-running tax evasion tensions with Switzerland.

Germans lose if tax deal rejected, says banker
Tax votes on Friday at the Bundestag in Berlin (Photo:Mfield)

If the upper house of the German parliament on Friday votes down a deal on the taxation of German assets parked in Swiss bank accounts it would mean "lost money for the German state," the head of the Swiss Bankers' Association Claude-Alain Margelisch told reporters in Geneva on Wednesday.

Under the terms of the proposed tax deal between Bern and Berlin, Swiss banks would deduct taxes from German clients and transfer the tax revenues to Berlin — thus allowing the clients to remain anonymous.

German Finance Minister Wolfgang Schaeuble has estimated that the agreement could net his country around 10 billion euros ($12.8 billion) in tax payments.

Germany's lower house has already approved the deal but it is expected to have a bumpier ride on Friday when it comes before the upper house — the Bundesrat — where opponents believe the deal is too soft on tax-dodgers.

As long as the agreement was not signed, Margelisch said, "there would be a problem clearly for Germany," since it would miss out on the opportunity to lift a ten-year statute of limitation currently placed on its back-tax claims in Switzerland.

"If there is no deal signed, it's lost money for the German state," he said

If ratified, the tax deal is set to take effect on January 1st, and will entail taxation rates of between 21 and 41 percent on German assets held in Switzerland.

Switzerland has reached similar deals with Austria and Britain and is in discussions with Greece and Italy on the so-called "Rubik" accords.

Margelisch also stressed that a German green light for the deal could encourage other countries, like France, to agree to similar arrangements.

The banking chief said that the total managed assets in Swiss banks had risen again in the past year, indicating that investors were not frightened by the country's pending tax deals.

In total, banks in Switzerland managed assets worth nearly 5.3 trillion Swiss francs ($5.6 trillion) in 2011, Margelisch said,
pointing out that foreign assets continued to account for just over 50 percent of total assets under management.

"It would seem the expectation that foreign clients would withdraw huge sums if Swiss banks were to adopt a strategy of focusing on taxed assets and signing agreements with major partners is not being realised," he said.

As much as 180 billion euros ($231 billion) in undeclared German assets have been stashed in Switzerland, according to unconfirmed media reports.

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Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?

When it comes to borrowing money from a Swiss bank, nationality may play a role in some cases, but not in others. This is what you should know about this process.

Reader question: Can a foreign national obtain a loan in Switzerland and under what conditions?
Getting a losn in Switzerland is subject to many conditions. Photo by Claudio Schwarz/Unsplash

Like almost everything in Switzerland, consumer loans are regulated by legislation, in this case the Consumer Credit Act.

It defines a loan as between 550 and 80,000 francs, “offered by commercial providers of financial services”. Lower or higher amounts are not subject to the Consumer Credit Act.

As is the case in many other countries, Swiss banks have strict criteria about who they lend money to. After all, no financial institution wants to deal with people who are not creditworthy.

Whether or not a foreign national can borrow money from a bank depends on their permanent place of residence and permit status.

As a rule, Swiss lenders don’t give loans to non-residents. So if you reside abroad, there is practically no chance that a bank in Switzerland will lend you money.

However, some financial institutions make exceptions for cross-border workers. If you fall under this category, you can use this interactive tool, select “ Permit G” under “Residence Permit” and see what, if any, options, there are.

READ MORE: EXPLAINED: What cross-border workers should know about taxation in Switzerland

If you are a foreign national but have a permanent residence status (Permit C), your chances of getting a loan are practically the same as those of Swiss citizens — provided, of course, that you meet all the requirements set by lenders (see below).

What about other permit holders?

If you have a B Permit, you might be approved for a loan, depending on how long you have had this permit — obviously, the longer the better.

However, “you may be offered a higher interest rate or a limited loan amount. This is because of the statistically higher probability that you will return to your home country. Some lenders require the loan to be repaid by the time the B permit expires”, according to consumer comparison site 

Holders of other, temporary or conditional permits are not accepted.

READ MORE: ‘A feeling of belonging’: What it’s like to become Swiss

What conditions — other than residence permit — should you fill to be considered for a loan?

You must be at least 18 years of age, though additional restrictions may apply to applicants under 25 — for instance, a higher interest rate or a limited loan amount. That’s because “lenders are generally more cautious with young applicants as their financial circumstances are usually less settled and the risk of default is deemed to be higher,” Comparis noted.

The same cautious approach applies to pensioners, especially those who have no regular income. The social security payments (AHV/AVS) do not count as income for the purpose of the loan.

There is also other eligibility criteria, based on employment status and salary. People with a regular income have a higher chance of obtaining a loan than those who are self-employed, temporarily employed, work on hourly basis or, logically, unemployed.

Other factors, including your existing debts, are also taken into account in the decision process.

Basically, lenders favour applicants with a stable income and good financial standing, in much the same way as supplemental health insurance carriers prefer young and healthy people.

Keep in mind that if your loan application is rejected, this will be recorded in the database of the  Central Office for Credit Information, making it more difficult, though not impossible, to get a loan in the future.

The same rules do not apply to American citizens

That’s because Swiss and European banks are subjected to US demands to disclose the assets of Americans overseas in order to prevent tax evasion.

As adherence to these requirements is a major headache for the banks and in some cases also violates their country’s privacy laws, financial institutions prefer not to deal with Americans at all, even those who are permanent residents.

If you are a US citizen who also has Swiss nationality, you may have an easier time of it, but could still face hurdles in obtaining loans and other banking services.

There is no immediate relief in sight, although many organisations representing Americans abroad are lobbying in Washington to change the existing legislation.