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Liechtenstein bank owes tax dodger damages, court rules

A German tax dodger has won millions in damages in a suit against his Liechtenstein bank for failing to reveal that his information was stolen along with hundreds of other account holders and sold to Berlin for a criminal investigation.

Published: 8 February 2010 11:16 CET

Liechtenstein bank owes tax dodger damages, court rules

Photo: DPA

The case against LGT Treuhand, a former subsidiary of the LGT Group, was decided in January, according to a report in daily Süddeutsche Zeitung on Monday.

The Bad Homberg real estate developer, who was exposed for tax evasion when a bank employee sold the data to the German intelligence service for €4.5 million two years ago, has been awarded €7.3 million by the Vaduz district court.

The tax fraud scandal that followed the sale of the data pointed to some of Germany’s top earners, among them former Deutsche Post boss Klaus Zumwinkel, who was convicted to two years probation and a hefty fine in January 2009. According to the paper, state prosecutors are still investigating up to half of the 845 cases involved.

The Liechtenstein court case has been closely watched by numerous other Germans who are also planning to sue the bank, the paper said.

They argue that if the bank had informed them that their data had been sold, they could have turned themselves in, receiving temporary amnesty and much lower fines.

The bank subsidiary’s successor Fiduco Treuhand AG plans to appeal the case, the paper said.

Meanwhile a newly uncovered tax evasion scandal reached a new dimension last week, as German officials said more stolen data detailing up to 1,500 tax dodgers with funds stashed in Swiss accounts could mean some €400 million in unpaid taxes for state coffers.

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German cabinet ministers approve sweeping tax reform plans

The changes are part of Finance Minister Christian Lindner’s (FDP) second annual tax law, a wide-ranging package of tax reforms that will now move to the Bundestag for approval.

The reforms are intended to adapt Germany’s tax system to the current high cost of living and address some inequalities in how couples are taxed.

“It is simply a matter of fairness to adjust the tax system to inflation,” Lindner said at a press conference when introducing the proposals in June. “The state must not be the winner when there’s high inflation.”

One of the cornerstones of the reform is the increase in the tax-free allowance – the amount employees can earn without being subject to taxation.

This amount will increase by €180 to €11,784 this year and rise incrementally to hit €12,336 by 2026.

The child tax-free allowance will also see gradual increases over this period, starting with €228 extra this year and rising to €6,828 by 2026, while the child benefit (Kindergeld) will also go up by €5 per month from 2025.

READ ALSO: How Germany’s planned tax shake-up could affect you

Lindner has also set out plans to combat ‘cold progression’: a phenomenon whereby an increase in earnings is eaten up by inflation but taxed at a higher rate regardless. This means the income threshold for each tax bracket will be pushed upwards next year, with the exception of the highest tax rate.

The top tax rate of 45 percent will still apply to incomes above €227,826, but the thresholds for the solidarity surcharge will be raised.

German Finance Minister Christian Lindner arrives for the weekly cabinet meeting at the Chancellery in Berlin

German Finance Minister Christian Lindner arrives for the weekly cabinet meeting at the Chancellery in Berlin on May 15th, 2024. Photo: Tobias Schwarz / AFP

Though Lindner managed to pass his reforms in cabinet on Wednesday, his centre-left coalition partners from the Social Democrats (SPD) and Greens have previously aired their scepticism about the reforms.

“You can’t demand drastic savings from other departments…and then demand tens of billions yourself without need,” Green Party finance expert Katharina Beck recently told Reuters, referring to recent budget cuts for departments like defence and infrastructure.

Describing the plans as “dubious”, Beck argued that they would primarily benefit the well-off.

Changes for couples

A cornerstone of the reforms includes removing a loophole often used by couples with differing incomes to reduce their taxes.

The current tax classes 3 and 5, which come with higher tax-free allowances and higher deductions respectively, are set to be abolished by 2030. Instead, couples will automatically be placed in tax class 4.

This change aims to distribute the tax burden more equitably between partners, reducing the need for end-of-year tax payments and addressing the perception that lower-earning partners’ work is undervalued.

However, the reform stops short of scrapping the marriage splitting system – known as Ehegattensplitting in Germany – which benefits couples with disparate incomes by combining their earnings for tax purposes.

READ ALSO: Ehegattensplitting – How did Germany’s marriage tax law become so controversial?

While many in the traffic-light coalition have spoken out against Ehegattensplitting, the FDP opposes its abolition, equating it with a significant tax increase for couples.

However, critics say the shared taxation helps perpetuate income disparity and part-time work among women.

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