Nomura grabs Lehmans Asia business


Among law-abiding Germans, the dominant feeling evoked by the country's largest tax evasion investigation has been a mix of Schadenfreude and outrage. For tax lawyers, it has meant mainly one thing: overtime.
"There is a huge amount of insecurity around," says Carsten Tiemer at Harms-Ziegler, a Berlin law firm. "The demand for information among our clients has rocketed."


LGT, the Liechtenstein bank at the centre of the investigation, has "decisively rejected" the assumption that all 600 of its German clients whose details were obtained by the BND intelligence service were tax evaders. Yet German authorities are treating everyone on the list as a potential suspect. "There are very few objective reasons to hold your money in a Liechtenstein trust other than to hide it from us," says a German official.


Since the start of the investigation, the finance ministry has thus urged all tax evaders to file a Selbstanzeige - to voluntarily contact their tax authorities with details of their accounts - suggesting this would lead to more lenient sanctions. Given the harsh sentences associated with tax evasion - a maximum of 10 years in prison, with statistics showing an average of 10 days imprisonment per €100,000 ($150,000, £75,000) spirited away, not to mention stiff fines - the attraction is high.
"Whether to step forward is the central question," says Franz Bielefeld at law firm RP Richter in Munich. "My advice is always to do it and, given the high risk of being uncovered now, it seems to be the only reasonable option."
How much leniency depends on how much the investigators know.


Once they are knocking at the door, it is generally too late to step forward.
In such cases, there might still be arguments in favour of volunteering information. "Say the investigators only have details of your accounts up to 2002, by volunteering information about the following years, you could avoid sanctions related to these years," says Mr Tiemer.
Stepping forward might also dissuade the tax inspectors, who act in tandem with the police, from conducting a full search of the suspect's house and office, always a traumatic invasion of an individual's privacy, he says.
But there might be downsides. Lawyers point out that a court's decision on tax evasion depends on the quality of the information presented by the prosecutors. If it is scarce and the case poorly documented, there might be no benefit in volunteering extra evidence.
If the inspectors already possess extensive evidence and have been on a suspect's trail as he or she steps -forward, says one lawyer, volunteering information will not lead to a more lenient treatment.
Once uncovered, a suspect has few options other than a Blitzüberweisung, an immediate transfer of all unpaid taxes - including i
nterest - to the tax authorities.


The final few


There are still several jurisdictions that promise secrecy.
The Organisation for Economic Co-operation and Development recently named Cyprus, Panama and Singapore - along with Liechtenstein - as offshore centres that have significant restrictions on access to bank information for tax purposes.
Restrictions also exist in three OECD countries: Austria, Luxembourg and Switzerland, although Switzerland recently weakened its secrecy laws and co-operates more fully in foreign criminal investigations.


By Bertrand Benoit in Berlin

Published: February 27 2008 02:00

Last updated: February 27 2008 02:00

Copyright The Financial Times Limited 2008

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