In a statement released on November 4th the Finance Ministry of Germany revealed that the country saw a marked increase in tax collections for the year, with recorded tax revenues exceeding the government’s projections made earlier in May.

According to the Finance Ministry of Germany, the total tax collections for the year will reach EUR 571.2 billion. Originally it was estimated that the collections level would only be EUR 555 billion. The EUR 16.2 billion boost to the budget will be used to slash the country’s current EUR 48 billion budget deficit.

Commenting on the latest tax collections analysis, the Deputy Finance Minister Steffen Kampeter said that the high revenues were a result of unexpected but steady economic growth throughout 2011. The Deputy Minister added that the government now forecasts continued economic growth for the country in the next year, but warned that the expansion is slated to slow down in 2012. The government projects that the cumulative tax collections for the years 2011 through to 2015 will be EUR 39.5 billion higher than previously forecasted.

Discussions are already rising over what Germany will do with the new found funds. The Finance Ministry indicated that cuts to personal income taxes were now a feasible possibility, although taxpayers should not expect any drastic reductions to their obligations. Steffen Kampeter explained that the government is still primarily focused on balancing the national budget by 2016.

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In a statement made by representatives of Credit Suisse on September 19th in Dusseldorf, the bank announced that a solution has been reached to the ongoing animosity with German tax authorities. The disputes centered on accusations that Credit Suisse staff knowingly aided German taxpayers in evading their tax obligations in Germany through the use of Credit Suisse bank accounts.

The deal will see Credit Suisse pay EUR 150 million to German tax authorities to end their investigations. German authorities have agreed that they will also stop investigations and prosecution of individual employees of Credit Suisse. As part of the agreement, the bank will not make any admission of responsibility for tax evasion by German taxpayers who used Credit Suisse accounts to hide their funds.

According to the bank’s statement, the deal with German tax authorities avoids a complex and prolonged legal dispute, and provides customers and investors with assurances of legal certainty.

Credit Suisse has been under investigation by German authorizes since last year, when tax officials launched a probe into 1100 Credit Suisse clients who were suspected by German authorities in tax evasion. The bank is currently facing the prospects of investigations for similar charges by tax authorities of the USA.

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Swiss banks will soon shell out CHF 2 billion (EUR 1.9 billion) to Germany to cover lost tax revenues resultant from German taxpayers hiding their assets in Swiss bank accounts. The payment comes as a part of a deal reached between German and Swiss tax authorities aiming to put an end to the occurrence of German nationals using the Swiss banking system to hide their assets and capital, and evade their tax obligations.

The details of the final draft of the new agreement were jointly announced by the German and Swiss tax authorities on August 10th, and the agreement is expected to be officially signed by representatives from both governments within a few weeks. After the agreement is enacted, German taxpayers with Swiss bank accounts will be charged a 26.375 percent withholding tax on all investment incomes and capital gains arising from the account. The tax will be paid by the Swiss bank to German tax authorities anonymously and without disclosing details of the taxpayer. The new procedures will allow Swiss banks to maintain their reputed levels of banking confidentiality. Additionally the new agreement will allow account holders to settle already incurred tax obligations on their existing accounts by paying an penalty on their unpaid taxes. The penalty will vary from 19 percent to 24 percent, with the rate based on how long the account has been open for, with the earliest assessment period currently being set at the year 2000.

To further ensure that in the future the Swiss banking system is not used to hide assets and capital, and evade tax obligations by German taxpayers, the new agreement allows German tax authorities to request bank data on German taxpayers. The inquiries must contain the alleged evader’s name, but not necessarily the name of the bank. To stop the occurrence of “fishing expeditions” by German tax authorities, the number of requests is limited to 999 per year.

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In a statement released on June 6th the Office of the Attorney General of Germany revealed that German tax authorities and police have successfully put an end to a tax fraud scheme which has so far cost the government EUR 13 million in lost sales tax revenues.

Throughout this week, German tax officials have conducted raids on 147 offices and private residence across the country, and investigations are being carried out on 13 different companies in connection with the tax fraud claims. Four individuals have already been arrested for their involvement in the scheme, and another 23 individuals are currently being investigated further.

According to German tax authorities, the scheme exploited pitfalls in EU tax laws, which allow for cross-border transactions to be exempt from Value Added Taxes. It is alleged that the German companies were buying large numbers of high-end mobile phones from other EU countries, without paying any VAT in the country of purchase. The goods would be delivered to Germany, and repurchased through series of local companies, in an attempt to obscure their origins. Eventually the phones were sold back to wholesalers in other EU countries, and a VAT refund would be claimed by the German company despite never having originally paid the tax.

The companies involved in the scheme have been stockpiling phones since the start of the year. Prosecutors said that the phones were the latest models of high-end brands, making them easier to sell. In particular, the Apple iPhone 4 was one of the most popular models involved in the scheme.

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As it was announced in a press release on June 3rd, the Germany’s three coalition parties are set to introduce a new legislative proposal on June 6th, to lower personal income tax rates from January 2013.

The tax cut is being supported by the leading Christian Democrats (CDU), and its coalition parents the Free Democrats (FDP) and the Christian Social Union (CSU). The exact size of the proposed cuts was not revealed yet, with full details expected to be released on June 6th. However, according to a joint statement made by Chancellor Angela Merkel, CSU leader Horst Seehofer and FDP head Philipp Rösler, the proposal is aimed at providing tax relief specifically for lower and middle income families, and lessening “fiscal drag”. According to forecasts made by analysts, the tax breaks will be worth several billion Euros, but will not exceed EUR 10 billion.

Tax cuts have been a contentious issue in the German parliament this year, with debates raging over the economic feasibility of reducing the national tax take. The coalition parties have been arguing that the country’s current levels of economic growth can justify up to EUR 10 billion in overall tax cuts while still slashing the budget deficit. According to the press release, the new round of cuts, “…are an important precondition for more consumption and investment. Domestic demand will be strengthened, making tax policy growth policy.”

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