Swiss backed into a corner in tax case with Germany

The reputation of the Swiss banking sector took another hit yesterday after Germany hinted it might buy data on tax cheats from a whistleblower, with analysts saying that the Alpine state had little room for manoeuvre.

"None," said Bank Helvea analyst Peter Thorne, when asked what options Switzerland had on the issue.

"The Swiss banking sector has just got to recognise that reality. They have to clean up their industry as far as possible so that they can begin to emphasise attributes that they have," he said.

Yesterday, German Chancellor Angela Merkel said "everything must be done to get hold of these data".

While she did not say if the country would pay for the information, the German finance ministry said that Berlin was considering following a 2008 "precedent" involving Liechtenstein, another Alpine country that has come under fire for helping investors conceal their wealth from the taxman.

In that case, the German secret service handed over five million euros for the names of hundreds of Germans allegedly hiding some four billion euros.

The Swiss Finance Minister has warned Germany that it would not provide administrative assistance on any tax inquiry based on stolen data.

This means that banks would also not be allowed to cooperate under banking secrecy laws, said Roland Meier, the Swiss finance ministry's spokesman.

"Banking secrecy prevents them from releasing data," he stressed.