Germany re-examines ethics as police raids expand in tax evasion case
FRANKFURT: It has become a familiar tableau in Germany during this season of scandal, even if the names of the disgraced and the details of their misdeeds change from one case to the next.
On Monday, the police fanned out across Germany, raiding the homes and offices of suspected tax evaders in Munich, Frankfurt, Hamburg, and Stuttgart. They carted away boxes of documents, adding to the mountain of evidence in a tax evasion case that is only the latest sensational scandal here.
From the investigation of bribery at Siemens to the prosecution of illicit conduct at Volkswagen, Germany is undergoing what amounts to a painful national cleansing process - trying to rid itself of patterns of behavior that, it is finding, are not accepted in an increasingly global economy.
“Were seeing a change of spirit,” said Jan Pieter Krahnen, director of the Center for Financial Studies at the University of Frankfurt. “Things that were once tolerable are no longer acceptable.”
Tax evasion was never legal in Germany, unlike, say, payoffs to foreign officials, which were not only lawful, but tax deductible, as recently as 1999 - a point sometimes raised by those sympathetic to Siemens.
But tax experts say many Germans have long viewed it as a form of sport to avoid their countrys high tax rates by sheltering their money in havens like Switzerland, Austria, Luxembourg, and Liechtenstein, the Alpine principality that is the focus of this investigation.
“A lot of Germans are not aware this is a serious crime,” Manuel Renй Theisen, a professor of tax law at the University of Munich, said. “And the sense of it being a game is true on both sides: The state is looking for the peoples money, and the people dont want to give it up.”
Now, though, such ethical laxity is colliding with the new boldness of German tax authorities. Prosecutors have obtained arrest warrants for as many as 700 suspected tax frauds, officials here said, using data on a computer disc that had been stolen from a bank in Liechtenstein.
The tax scandal has already claimed one of the most prominent corporate leaders in Germany, Klaus Zumwinkel, who was apprehended in a raid last Thursday on suspicion that he used Liechtenstein to evade \1 million, or $1.46 million, in taxes. He resigned the next day as chief executive of the German postal service.
Prosecutors said little about the targets of the raids Monday, which cut across the country and included the Frankfurt and Munich offices of Metzler, a centuries-old private bank that caters to rich customers.
“We do not give any information on places or actions,” said a spokesman for the prosecutor in Bochum, Germany, whose office is coordinating the investigation. “We do not want to create a scavenger hunt.”
But with talk that sports stars and other celebrities may be involved, the case is likely to keep Germany in thrall for weeks. Chancellor Angela Merkel of Germany said she would raise the issue with Liechtensteins prime minister, Otmar Hasler, when he visits Berlin this week. And the mere threat of prosecutions may be enough to prompt some tax evaders to confess.
Andreas Bцhm, a partner at a three-person Berlin law firm, Bцhm Law Office, said that since Thursday, twice the normal rate of people had asked about reporting their own tax evasion. They ranged from small fry to high earners who genuinely have something to fear, he said.
“Some people want to clean their conscience and sleep better,” Bцhm said. “Others want to avoid going to jail.”
Even more than the Siemens and Volkswagen corruption cases, the tax scandal is stoking bitterness toward the German business elite, whom many ordinary Germans view as greedy and unaccountable.
A study released here Monday said that the compensation of senior German executives rose 17.5 percent in 2007, at a time of stagnant wage growth, according to the Kienbaum executive search firm.
At Siemens, the engineering giant, investigators uncovered “suspicious payments” of \1.3 billion, which they say they believe may have used over the years as bribes to win foreign contracts. The companys chief executive and chairman lost their jobs in the ensuing furor.
At Volkswagen, the personnel chief, Peter Hartz, pleaded guilty to paying off the carmakers union leader to win his support for company policies. Volkswagen also financed visits to prostitutes, according to prosecutors. Hartz received a two-year suspended sentence and a fine.
“The clubby atmosphere still exists in Germany,” Krahnen said, “but it is disappearing quickly. Were going in the direction of a more level playing field, more capital-market-oriented.”
