Dutch tax evasion probe - should the state buy stolen data?

Germany is reportedly considering the purchase of another CD-ROM containing the names of potential tax evaders with foreign bank accounts.

Several years ago, Germany purchased a similar CD-ROM from the employee of a Lichtenstein bank, sparking an enormous tax evasion probe. Dutch Deputy Finance Minister Jan Kees de Jager confirms that his ministry will ask Germany to pass on any relevant information on the new CD-ROM to the Netherlands.

In 2008 the German foreign intelligence agency BND paid up to five million euros for a CD-ROM containing data relating to at least one thousand accounts. The tiny principality's banking secrecy laws allowed clients to hide their assets from the tax authorities. Now an anonymous whistle-blower has offered the Germans data concerning 1,300 Swiss accounts for 'a mere' 2.5 million euros.

The Liechtenstein CD-ROM led to serious tensions between Germany and the tiny principality. However, it also added 100 million euros in previously unpaid taxes to Berlin's coffers. The German fiscal authorities provided the names of Dutch clients to their colleagues in The Hague, including the holders of 19 private accounts and two business accounts.

Spearhead
The Dutch Finance Ministry has in recent years made the prosecution of tax evasion one of its policy spearheads. Deputy Minister De Jager has tripled the fine for tax evasion from 100 to 300 percent. At the same time, he has offered a temporary amnesty for tax evaders. Last year alone, hundreds of people with foreign accounts made use of the voluntary 'own-up' scheme and paid taxes on their unreported wealth.

The fact that another CD-ROM with data on foreign bank accounts has surfaced is great news for De Jager. He has no moral qualms about the issue. His ministry has confirmed that if Germany purchases the data the Netherlands will ask Berlin to hand it over.

Cooperation
Times are changing with regards to laws concerning banking secrecy. The dispute between Germany and Liechtenstein resulted in an agreement last year on the exchange of banking data. Switzerland also promised to cooperate and the two countries have since been scrapped from the Organisation of Economic Cooperation and Development's blacklist of 'uncooperative tax havens'.

Last year the leaders of the Group of 20 leading economies vowed to strive for the 'end of banking secrecy'. De Jager made good use of the occasion. He announced that as of the 1st of January 2009, Dutch taxpayers who reported their previously unmentioned assets would be let off with a fine.

Lack of faith
However, is it acceptable for governments to purchase stolen bank data if one takes into account that it is now easier to trace tax evaders and that notorious 'tax havens' have made it far more difficult for clients to avoid paying taxes due to banking secrecy laws?

Switzerland says paying whistle-blowers for stolen information is both unacceptable and also demonstrates a lack of good faith.

European MP Jeanine Hennis-Plasschaert, who represents the liberal VVD party in the European Parliament, is opposed to the deal. She asks on Twitter: "Since when does the government do business with criminals?"

Tattle tale

The answer to the last question is simple: It's been done for decades. Using thieves to catch thieves has also long been a means of catching criminals in The Hague. An example is the fight against organised crime. Professor Leo Stevens, who teaches business and fiscal policy at Rotterdam's Erasmus University says he has "mixed feelings" about the approach.

"I've been brought up with the children's verse: Tattle tale, tattle tale. Hang your britches on a nail.' (Whistle-blowing) is not something which society readily accepts. On the other hand, the threat that (tax evasion) poses to society should not be underestimated. One should carefully weigh the pros and cons as well as the circumstances."

Careful

German Chancellor Angela Merkel has not yet clearly explained how far she is prepared to go, only that "just as any other right-minded person" she believes that there should be a major crackdown on tax evasion. Professor Stevens thinks that Deputy Minister De Jager has done a much better job explaining where the limits lie.

"Last October he already wrote a letter explaining his policy with regards to these kinds of purchases" (of data containing information on clients' bank accounts). The letter gives the impression of being very subtle and well-balanced. However it is quite clear. He says: "We are in favour of purchasing this type of information." "

Hence, there is no danger of a diplomatic incident with Switzerland, while there is a very good chance that the state will receive millions of extra euros in income. As well as praise for its "subtle" policy. In the affair of the stolen bank data, the Netherlands does not have to do anything but to sit back and rub its hands in glee.

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