Germans Hide Cash in Diapers as Swiss Secrecy Crumbles (Sep 2013)


Source: Bloomberg – Germans Hide Cash in Diapers as Swiss Secrecy Crumbles

Notable excerpts:

Germans who avoided taxes by keeping money in Switzerland are bringing wads of cash home and hiding it in odd places.

With Swiss banks the target of an international crackdown against tax evasion, the government wants the industry to stop managing undeclared funds. This requirement, combined with high-profile cases such as Bayern Munich President Uli Hoeness, who is charged with using a Swiss account to evade paying taxes, and the purchase of client data by German officials, has frightened tax cheats into action, according to customs agents.

“We had a 72-year-old man wearing a woman’s corset with 150,000 euros stuffed inside,” said Markus Ueckert, a spokesman for the German customs district of Loerrach, one of the three that border Switzerland. “In another instance, a man had on two incontinence diapers with nearly 140,000 euros in between.”

Non-resident Germans and Britons may have held 164 billion francs ($175 billion) of undeclared funds in 2010, according to an estimate by Booz & Co. Since then, more than 36,000 requests for tax amnesty were filed in Germany. Those who don’t want to come clean are prepared to violate the law that requires cash of more than 10,000 euros ($13,200) to be declared at the border.

The customs districts bordering Switzerland turned up 20 million euros of undeclared cash last year. In the Bavarian border town of Lindau, where officers once caught a man with 25,000 euros stuffed inside a gingerbread house, 2 million euros of undeclared bills were discovered last year.

“A pair of pensioners had money in their shoes, and we had a case of money hidden by the car battery,” said Harald Gabele, a spokesman for Germany’s Singen district. “You regularly have instances of people wearing a secret money belt or concealing it in their underwear.”

Tax evasion is a hot campaign topic ahead of Germany’s election on Sept. 22. Peer Steinbrueck, who is running for the chancellorship against Angela Merkel, criticized Switzerland’s stance at a rally last month. “I don’t have a problem saddling the cavalry to fight tax fraud and tax evasion,” he said.

Germans are the largest group of foreign tourists in Switzerland, and their vacations mean easy access to accounts. Not only millionaires such as Hoeness and former Deutsche Post AG (DPW) Chief Executive Officer Klaus Zumwinkel, who was convicted in 2009 of tax evasion, may hold secret accounts. Avoiding taxes is a “national sport” practiced by dentists and taxi drivers alike, said Frank Wehrheim, describing his three decades as a German tax official for Handelszeitung in a 2012 interview.

Switzerland negotiated withholding tax agreements with Austria and the U.K. that allow the countries to recoup tax revenue and preserve secrecy. A similar deal with Germany was rejected because of parliamentary opposition in Berlin.

For Germany, breaches of the 10,000-euro rule increased 11-fold since 2000 to 2,489 last year; the penalty equals 10 percent and 25 percent of the discovered sum.

German border agents also hunt for stacks of papers that point to secret accounts.

“To hold a binder with lots of bank statements, that’s quite a good feeling,” said Georg Kruegers, a German customs officer who inspects traffic coming from Switzerland and Liechtenstein into the town of Lindau. The documents that his team finds get forwarded to tax authorities, who investigate whether the money has been declared.

Last year, the Ulm district, which includes Lindau, uncovered evidence of about 1.3 billion euros held offshore, according to spokesman Hagen Kohlmann. The tally was 500 million euros in 2011, down from 1.85 billion euros in 2010, he said, explaining that not all the money was undeclared.

On an August afternoon, a seven-person team from Lindau flagged down passing cars, including a sedan carrying a gaunt man and his white-haired mother. In a bag, the officers discovered 8,000 euros of crisp 50 euro notes. While unusual, that amount of money doesn’t need to be declared to customs.

“We scratch a lot, but it’s just the surface,” said agent Daniel Remmers, adding he hoped that the Lindau team’s searches of both beat-up sedans and glossy BMWs would scare tax dodgers. “A scratch on an expensive car still hurts.”


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