The withholding tax agreement of 2011

The Swiss offer and the negotiations

The Swiss government sought a way out of the conflict that would preserve banking secrecy while giving the German state its revenue. The concept, developed in the Swiss banking industry and later known as “Rubik”, extended the logic of the savings tax agreement to all forms of investment income and to the past. Swiss banks would levy a final withholding tax on the investment income of German clients at the German rate and transfer the proceeds anonymously to Germany. Undeclared assets held in the past would be regularised by a one-off payment calculated as a percentage of the capital. Clients who preferred could instead authorise their bank to disclose their accounts to the German tax authorities. Germany, for its part, would renounce the purchase of stolen data and would receive, through a limited number of information requests, a means of verifying that German residents did not simply move their money elsewhere.

The agreement between the Federal Republic of Germany and the Swiss Confederation on cooperation in the areas of taxation and financial markets was signed on 21 September 2011. It was amended by a protocol of 5 April 2012, which responded to criticism in Germany and concerns of the European Commission about compatibility with the savings tax agreement between Switzerland and the European Union.¹ As amended, the agreement provided that capital income and capital gains of German taxpayers in Switzerland would be taxed at the German rate of 26.375 per cent, corresponding to the flat tax of 25 per cent plus the solidarity surcharge. Future inheritances of undeclared accounts would be taxed at 50 per cent unless the heirs agreed to disclosure. Undeclared assets held on 31 December 2010 would be regularised by an anonymous lump-sum payment.² The rate of that payment ranged between 21 and 41 per cent of the capital, the highest rates applying to large accounts. The Swiss banks undertook to make an advance payment of two billion francs, to be recovered from the subsequent payments, and Germany was allowed to make a limited number of information requests, about 1,300 in the first two years, without having to name the bank.³

Ratification in Switzerland and the Bundestag

Switzerland approved the agreement quickly. Both chambers of the Federal Assembly adopted it in the first half of 2012, together with the parallel agreements with the United Kingdom and Austria, so that the Swiss side was ready long before the German one.⁴ In Germany, the Bundestag approved the agreement on 25 October 2012 with 312 votes in favour, 256 against and one abstention. The debate followed party lines. The finance minister, Wolfgang Schäuble, defended the agreement as a practical compromise between sovereign states and warned the Bundesrat against rejecting it. The Free Democrats praised it for resolving the past and securing correct taxation for the future. The Social Democrats argued that it had more disadvantages than advantages, the Left party called it a gift to tax cheats, and the Greens objected that it pointed in the wrong direction both for the past and for the future, not least because capital income would continue to be taxed more lightly than income from work.⁵

Rejection in the Bundesrat

The agreement required the consent of the Bundesrat, the chamber of the Länder, because it affected revenue shared between the federation and the Länder. In the Bundesrat, the Länder governed by Social Democrats and Greens held a majority. On 23 November 2012 the Bundesrat refused its consent.⁶ The federal government called the mediation committee, but the procedure could not change the treaty text and ended without a result. The Bundesrat confirmed its refusal on 1 February 2013, which ended the agreement.⁷

The reasons for the rejection were partly principled and partly political. The opponents argued that the agreement treated tax evaders more favourably than honest taxpayers, because the one-off payment was lower than the tax, interest and penalties that a German taxpayer would have owed under a voluntary disclosure and because the evaders remained anonymous. The Left party’s description of the treaty as a gift to tax cheats summed up this charge. They argued that the limited number of information requests would not prevent the transfer of undeclared money to other jurisdictions before the agreement entered into force, and that the renunciation of data purchases would deprive the German authorities of their most effective instrument.⁸ The political context mattered as much. With the federal election of September 2013 approaching, the Social Democratic candidate for chancellor was none other than Peer Steinbrück, while the tax CDs of North Rhine-Westphalia had made its finance minister a prominent figure of the debate. An agreement negotiated by the Christian Democratic finance minister, which would have ended the purchases, offered the opposition an easy target.

The Swiss reaction was disappointment mixed with relief. The Swiss Bankers Association, as Chapter G.III records, called the decision incomprehensible and driven by domestic politics. Within the Zurich banks, however, a different conclusion was already gaining ground. The failure of the agreement meant that the German past would have to be settled by the clients themselves, through voluntary disclosures under German law, and that the banks would have to insist on it. Several Zurich banks had begun to require evidence of tax compliance from their German clients even before the Bundesrat vote, and after November 2012 the practice became general.

The British and Austrian agreements compared

The agreements that Switzerland concluded on the same model with the United Kingdom on 6 October 2011 and with Austria on 13 April 2012 entered into force on 1 January 2013. They offer the only available evidence of what the German agreement might have achieved. That evidence is sobering. The British government had presented the agreement with an expected yield of several billion pounds. The certified costing in the autumn of 2012 amounted to 5.3 billion pounds, 4.4 billion of which were expected from the regularisation of the past and 0.9 billion from future withholding tax. In December 2013 the Office for Budget Responsibility reported that receipts of the Swiss capital tax had so far totalled 789 million pounds. It attributed the shortfall to a smaller tax base than expected and to a greater behavioural response, including fewer British-held assets in Swiss banks, a larger number of non-domiciled individuals outside the agreement’s scope, failures of the banks to identify relevant accounts and the movement of capital to other offshore centres. Many taxpayers had also chosen other routes of disclosure, such as the Liechtenstein Disclosure Facility.⁹

The Austrian experience was similar. The Austrian government had budgeted one billion euros as a one-off payment for the past. According to figures of the Swiss Federal Tax Administration reported in September 2014, the actual receipts amounted to 738.3 million euros, most of which arrived in the first two months. More than 21,000 Austrians had declared assets totalling 5.9 billion euros.¹⁰ The Austrian agreement was terminated with effect from the end of 2016 when automatic exchange took its place, as Chapter G.III explains and Chapter K.III discusses from the Austrian perspective.

Two lessons follow from the comparison. The first is that the German opponents of the agreement were right to fear leakage: in both partner countries a substantial part of the undeclared money moved elsewhere or used other channels of regularisation before the Swiss banks could tax it, a behavioural response that the British fiscal watchdog identified as one of the main causes of the shortfall.¹¹ The second is that the German supporters of the agreement were also partly right, because the partner states did receive substantial sums quickly and without the cost of individual investigations. Whether Germany would have been better off with the agreement cannot be answered with certainty. What can be said is that the failure of the agreement did not prevent the regularisation of German money in Switzerland. It merely shifted the process from an anonymous Swiss mechanism to the German procedure of voluntary disclosure, which yielded more information and, in many cases, higher payments.

Notes

1. Wikipedia (German), “Steuerabkommen Deutschland–Schweiz”, https://de.wikipedia.org/wiki/Steuerabkommen_Deutschland%E2%80%93Schweiz, on the dates of signature and of the amending protocol, the Swiss approval in 2012 and the course of the German ratification. Cited for orientation and checked against the Bundestag and Bundesrat sources cited below. ↩
2. Deutscher Bundestag, “Bundestag stimmt Steuerabkommen mit Schweiz zu”, text archive 2012, week 43, https://www.bundestag.de/webarchiv/textarchiv/2012/41187733_kw43_de_schweiz-209792. ↩
3. Wikipedia (German), “Steuerabkommen Deutschland–Schweiz” (cited above), on the range of 21 to 41 per cent, the progression of the rate for accounts above one million euros, the advance payment of two billion francs and the limit of about 1,300 information requests. ↩
4. Wikipedia (German), “Steuerabkommen Deutschland–Schweiz” (cited above), which dates the Swiss approval to May 2012. ↩
5. Deutscher Bundestag, “Bundestag stimmt Steuerabkommen mit Schweiz zu” (cited above), with the result of the vote and the positions of the parliamentary groups. ↩
6. Bundesrat, press release 183/2012, “Steuerabkommen mit der Schweiz findet keine Mehrheit im Bundesrat”, 23 November 2012, https://www.vermittlungsausschuss.de/SharedDocs/pm/2012/183-2012.html. The press release notes that the Bundestag and the federal government could call the mediation committee, but that the committee could not propose changes to the text of the treaty itself. ↩
7. Wikipedia (German), “Steuerabkommen Deutschland–Schweiz” (cited above), on the failure of the mediation procedure and the final refusal of 1 February 2013. ↩
8. Wikipedia (German), “Steuerabkommen Deutschland–Schweiz” (cited above), which summarises the objections of the SPD, the Greens and the Left that the agreement was too lenient towards tax evaders and did not provide for adequate exchange of information. ↩
9. Office for Budget Responsibility, Economic and Fiscal Outlook, December 2013, box 4.3, “Tax agreements with offshore centres”, https://obr.uk/box/tax-agreements-with-offshore-centres/. ↩
10. “Steuerabkommen mit der Schweiz: Schwarzgeld-Milliarde blieb aus”, Tiroler Tageszeitung, 4 September 2014, https://www.tt.com/wirtschaft/wirtschaftspolitik/8925239/steuerabkommen-mit-der-schweiz-schwarzgeld-milliarde-blieb-aus. ↩
11. Office for Budget Responsibility, “Tax agreements with offshore centres” (cited above), which lists capital flight to other offshore centres among the reasons for the lower yield. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.