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September 21, 2017

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Credit Suisse denies Swiss bank help for Germans to dodge tax pact

ZURICH--The head of Credit Suisse denied on Monday that Swiss banks have been undermining a tax pact with Germany by helping wealthy clients move funds to rival financial centers such as Singapore to avoid becoming subject to taxes.

German media have accused Swiss banks of telling German clients to shift money to Singapore, Asia's prominent finance center, to avoid detection and taxation of their assets.

The allegations have made it more difficult for Germany and Switzerland to finalize a proposed deal that would leave German account holders anonymous, but under which the Swiss government would impose a retroactive withholding tax and would tax future interest income on the accounts.

A strategy of aiding tax dodgers is "economically stupid and morally unacceptable," Credit Suisse Chairman Urs Rohner told a conference.

"Some of the noise ... is clearly unfounded as far as I can check. For example, the accusation that a lot of clients funneled funds to other offshore centers like Singapore. Recent statistics on money flows will show you it's actually the other way around with regards to German money," he said.

The Swiss government has agreed on deals with Britain, Austria and Germany, is pursuing similar pacts with Greece and Italy, and has several more countries "banging on its doors" to negotiate treaties, Swiss banking lobby chairman Patrick Odier told the same business audience on Monday.

But the agreement with Germany may be nearing collapse after Germany's opposition Social Democrats made tax evasion an election issue.

Also Monday, UBS's chairman Axel Weber voiced confidence the two countries would resolve their differences in time for the deal to take effect Jan. 1. Weber's comments on the tax pact are noteworthy because in May, he switched sides and jobs, leaving as the head of Germany's Bundesbank to join the Swiss bank.

"This is an issue that can be solved rationally," between neighbors, Weber said, adding that the two countries had more common interests than differences.

German authorities in July raided the homes of clients of Credit Suisse. Last year, the bank paid a fine of 150 million euros (US$189.1 million) to end an investigation over allegations the bank and its employees helped Germans dodge taxes.

Opposition Social Democrats (SPD) leader Sigmar Gabriel said earlier this month there had been "organized crime in Swiss banks" helping Germans avoid tax evasion. Swiss bankers and politicians have denied the allegation.

German Chancellor Angela Merkel's government, which does not have a majority in the upper house, has said a tax deal could net Berlin huge sums, if and when it takes effect. Germans hold an estimate 150 billion euros in Swiss accounts.

Credit Suisse's Rohner urged the Swiss government to stay the course in negotiating deals with European governments.

"A withholding tax and a tax of legacy assets is the proper and sensible means to ensure tax compliance while safeguarding privacy," he said.

Swiss Banking under Pressure

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