Tax Scandal in Germany Fans Complaints of Inequity

The warrant outlined a typical Liechtenstein tax fraud, according to the German magazine Focus and the paper Bild am Sonntag: a foundation with the mailing address of Mr. Zumwinkel’s Italian vacation home, filled with 12 million euros ($17.5 million) that he obtained by selling 10 family businesses.

Mr. Zumwinkel, who helped transform Deutsche Post, the German postal service, from a stodgy state bureaucracy into a publicly listed logistics and freight-delivery powerhouse, initially tried to cling to his job. But after pressure from Chancellor Merkel and others, he stepped down.

The prosecutors announced that they had evidence against “several hundred” other German tax evaders, and an official said there would be additional raids in the coming week. Mr. Steinbrück, the finance minister, urged suspects to surrender to avoid jail time.

“The authorities are telling people even destroying documents will do them no good,” said Rudolf Schwenger, a former tax investigator in Frankfurt. “The best they can do is turn themselves in and get away with only a financial penalty.”

This latest scandal has echoes of one several years ago, in which an anonymous whistle-blower gave Bochum prosecutors a CD with names of 200 Germans who worked with a Liechtenstein citizen to hide money. The man, Herbert Batliner, who also worked with the financier Marc Rich, was a pioneer in the use of the foundation as a tax dodge.

The German Tax Union, an advocacy group, estimates that Germany loses 30 billion euros ($43.8 billion) a year to tax evasion. The government tried to recoup some of that with a 15-month tax amnesty program that ended in mid-2005. But it brought in only a fifth of the 5 billion euros ($7.3 billion) that the finance ministry had hoped for when it took the controversial step.

Spiriting money across the border is a deeply rooted tradition in Germany. During and after World War II, many wealthy Germans stashed assets in Switzerland to escape the political turmoil here — first under the Nazi regime, then under the threat of the Soviet army at their border.

They continued to take suitcases of cash to Liechtenstein, Switzerland and other havens through the postwar economic boom, when tax rates became some of the highest in Europe.

In 2002, analysts estimated that 300 billion euros ($438 billion) was hidden from tax authorities in Switzerland, Luxembourg, Liechtenstein and Austria. These four nations are more convenient for Germans to visit, and place assets in, than other tax havens, like those in the Caribbean.

But Austria and Luxembourg are now members of the European Union, making them less attractive. Like Switzerland, Liechtenstein is outside the union and depends on foreign deposits in its banks.

Several German celebrities have been caught trying to evade taxes. In 2002, the tennis champion Boris Becker was found guilty of claiming residency in Monaco when he was living in Munich.

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The tax scandal comes at a moment when Germany is undergoing what analysts describe as a shift to the left politically. Despite rising employment, many Germans are dissatisfied with stagnant wage growth and do not feel that they are sharing in the gains, according to surveys.

The starkest example of this shift was the surprising strength of the Left Party in recent regional elections. The party, which brings together disaffected Social Democrats, hard-core leftists and former Communists, moved beyond its strongholds in the states that made up the former East Germany to wins seat in the state Parliaments in Lower Saxony and Hesse, for the first time.

Next Sunday, voters in the city-state of Hamburg go to the polls, and conservatives fear a rout if the public seizes on the election as a chance to vent frustrations about tax evasion and what it seems to symbolize.

Even a few German business leaders ventured their own harsh words for tax evasion over the weekend.

“Not only family entrepreneurs but also the overwhelming majority of business executives is rightly worried in light of the damage that is being inflicted on the entire profession by the misbehavior of a small group,” the head of the German Chamber of Industry and Commerce, Ludwig Georg Braun, said in an open letter published in the German news media.

Copyright © 2008 The New York Times

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