Jérôme Cahuzac stepped down on Tuesday after prosecutors announced there would be a full criminal inquiry into allegations that he had an undeclared UBS bank account in Switzerland.
The 60-year-old former cosmetic surgeon is also suspected of moving assets to Singapore in order to hide them from the tax authorities.
Cahuzac said he had resigned to ensure that his case did not interfere with or overshadow the functioning of the government and reiterated he was innocent.
The magistrates in charge of the investigation, Roger Le Loire and Renaud Van Ruymbeke, will be seeking the cooperation of the Swiss and Singaporean authorities as they try to establish whether Cahuzac had accounts in either country.
Although politicians across the political spectrum insisted the former minister should be presumed innocent, there was widespread acknowledgement that his position in the government had been made untenable by the announcement of the probe.
Cahuzac had been charged with overseeing the complex array of spending cuts and tax rises required if France is to meet its commitments to cutting its deficit in line with EU targets.
"You don't replace Jérôme Cahuzac, you can only succeed him," the new budget minister, Bernard Cazeneuve, said on Wednesday in a tribute that underlined his outgoing colleague's status as a heavyweight member of President François Hollande's cabinet.
But aides to Hollande indicated that the president had been left with no option but to get rid of the budget minister, particularly as his brief included responsibility for clamping down on exactly the kind of tax dodging that the former minister is accused of.
"It was best to act quickly, before the judicial soap opera became a political one," a source close to Hollande told AFP.
As well as dealing a serious blow to Hollande's administration, Cahuzac's resignation represented a landmark moment in the French media landscape.
The story was broken, in January, by Mediapart, a news website with a hard-hitting style and investigative culture that contrasts with the generally more cautious approach of traditional print and broadcasting media in France.
The announcement of a criminal investigation based on Mediapart's reports is a significant boost to the credibility of the site, acknowledged editor-in-chief Francois Bonnet.
"Our only satisfaction is in seeing the quality of our journalism recognised," Bonnet told AFP.
"For months we have been in the crossfire from a section of our own profession, which has been extremely disagreeable, so it is excellent news that our work has resulted in an independent inquiry, which is what we have asked for since the beginning."
According to Mediapart, Cahuzac held funds in an account with UBS until 2010 and, in breach of French law, failed to declare the account to the French tax authorities.
The existence of the account was reportedly confirmed by Cahuzac himself in a message he left, apparently inadvertently, on the answer machine of a political rival in 2000.
Prosecutors announced on Tuesday that police experts had concluded it was highly likely that the voice on the recording was Cahuzac's.
The former minister has denied ever holding a UBS or any other overseas bank account and dismissed the allegations against him as "slanderous."
UBS
French seek Swiss aid on minister’s alleged fraud
French authorities on Wednesday appointed two top magistrates to oversee an international probe into suspected tax fraud involving a Swiss bank account that has forced France's budget minister to resign.
TAX EVASION
Switzerland’s banks remain among the world’s most secretive
Despite the progress made over the years, the Swiss financial sector continues to be one of the least transparent in the world. But there is good news too.
Switzerland is in the third place in the 2020 Financial Secrecy Index released by the non-governmental organisation (NGO) Tax Justice Network (TJN), which rates 133 nations based on their financial transparency.
Two other European countries, Luxembourg and the Netherlands, are also ranked among the top 10 least transparent nations on the TJN’s list.
Despite being in the third place, Switzerland ranks better this year than it did in the previous edition of the Index, which is released every two years — it slipped from the first to third place. The Cayman Islands and the United States took the first and second spots, respectively.
Switzerland reduced its risk of being an offshore haven for tax cheats by 12 percent, “finally improving enough to move off the top of the index”, TJN said.
READ MORE: Switzerland's strangest taxes – and what happens if you don't pay them
This improvement is mainly due to Switzerland extending its international network for the automatic exchange of customer information to more than 100 countries.
Also, in a referendum held last year, Swiss voters accepted the Federal Act on Tax Reform and AVS Financing (TRAF). This legislation introduced major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards.
This tax reform prompted the European Union to change Switzerland's status from ‘tax haven' to one which is EU-compliant, removing strict controls on transactions within the EU.
So why, despite all the reforms, does Switzerland still rank among the world’s least transparent nations?
According to a Swiss NGO Alliance Sud, wealthy people from poor countries can still hide their money here from the tax authorities of their home nations.
Alliance Sud noted that despite the progress made in the past years by Swiss financial institutions, “the fight against tax evasion remains insufficient”.
Switzerland is the world’s biggest centre for managing offshore wealth, with a quarter of global assets invested here.
For years, it has been placed on various lists of tax havens where wealthy foreigners could park their money. Faced with widespread criticism for this practice, Switzerland passed an anti-money laundering law in 1997 and introduced strict regulations against tax evasion.
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