Copyright © 2010 MoneyHoneyBlog. All Rights Reserved. Snowblind by Themes by bavotasan.com. Powered by WordPress.
The government’s plan to buy stolen data on Swiss bank accounts of alleged tax evaders generated a heated debate in Germany this week. A CD with some 1,500 names of German citizens with accounts at the bank (according to some reports HSBC’s private bank) was offered to the German authorities for the price of €2.5 million, by an alleged employee of the bank.
Germany’s main political parties have been divided on the question of legality and morality of the purchase. The opposition parties SPD (Social Democratic Party), Greens and the Left Party are in favour of the transaction; Angela Merkel’s Christian Democratic Union (CDU) and the business friendly Free Democratic Party (FDP) are split on the issue.
However, Chancellor Merkel has been very vocal on her intent to go ahead with the acquisition and Finance minister Wolfgang Schäuble (CDU) confirmed that the decision has, in principle, been made.
There is a precedent for such action – Bundesnachrichtendienst (Germany’s foreign intelligence service) paid €4.6 million to a thief two years ago, in exchange for confidential files on account holders at his former employer, LGT Group in Liechtenstein. That action netted the state approx €200 million in back taxes and penalties; then-CEO of Deutsche Post Klaus Zumwinkel was the most prominent German caught in the operation.
The majority of Germans approve the (possibly illegal) transaction – 57% want the government to pay for the stolen data, according to a poll by Stern.
The question is whether the state can and should buy stolen goods in order to catch potential tax evaders. To the government it appears to be a no-brainer. Not only will it play well with the populist sentiment of the moment, but the tax authorities may retrieve over €100 million in undeclared taxes.
Can a government break its own laws? According to prominent German legal experts – who have voiced concerns about the legality of the transaction – the government is running into a judicial minefield.
Purchase of stolen goods is a criminal offence in Germany and punishable with up to five years in prison. The question then is, must the state abide by its own laws, or is it exempt from such constraints, for some fictional ‘greater good’?
The notion that the authorities should be free to break the country’s laws ought to be inacceptable. Not only would it mean the state can commit a crime (or participate in one) with impunity, it would also encourage further data theft. It will not be long before another enterprising bank employee decides to quickly make a few millions by stealing confidential client information. The government’s action opens all doors to such criminal activity.
Germany is undoubtedly threading on dangerous terrain and the price to pay could be high. Put into question is the integrity of the German state and the rule of law.
Volker Kauder (Chairman of the CDU/CSU parliamentary group in the Bundestag) declared that the state should not collaborate with thieves. Constitutional law expert Prof. Dr. Helmut Siekmann said the possible multi-million euro revenue does not justify a purchase of illegally obtained data. In his view, the state, as the citizens, is obliged to abide by the laws. Data protection expert and Federal Commissioner for Data Protection and Freedom of Information Peter Schaar expressed great doubts about the legality of the transaction, considering it inacceptable.
Should any of the involved take the matter to court, the likelihood of the illegally obtained evidence being accepted as valid is low. The government will of course count on any tax offenders paying up quietly rather than taking on a lengthy legal battle against the state.
The question about the (im)morality of the proposed action seems easier still to answer. Then again, we should be under no illusion of our rulers being overly concerned with such matters.
When a government takes the liberty to ignore its own laws and willingly purchases stolen data in order to catch tax evaders and gain money for its coffers, what are the citizens supposed to think? If the authorities can break the law to satisfy their own pursuits, what example does it set for the people who until then had respect for law and order? Should the state not be bound by the laws of the land, even more so than its citizens?
Unsurprisingly, the relationship between Germany and Switzerland has suffered further damage. Swiss politicians of all parties have strongly condemned Germany’s intent to reward, rather than prosecute, the thief. The Conservatives compared Angela Merkel to a bank robber and the Swiss population seems to support that view.
“I consider it rather insidious that a state operating under the rule of law would make use of illegal data,” said Swiss President Doris Leuthard.
The Swiss see the German (and international) assault on their banking system and bank secrecy as a personal affront. Tax evasion, unlike tax fraud, is not considered a crime in Switzerland, and bank clients’ privacy is an utmost priority. The bank secrecy has started to crack recently, in particular thanks to US pressure on UBS and the bank’s resulting cooperation with US authorities. The country has a lot to lose; the financial sector is one of the most important for the Swiss economy.
But as shown above, there is far more at stake. No matter how keen the majority of the German population may be on prosecuting (supposedly rich) tax evaders, the ends must not justify the means. The government’s action should cause grave concern to everyone – not just those who dodge their taxes.
The rule of law requires that all individuals in a society are subject to the same laws, including – and especially – those who govern us. Our rulers cannot be exempt from it, regardless of any potential ‘good’ that might come from breaking the law. Indeed, what other protection from arbitrary government action and abuse do citizens have, if not the laws?
Clearly, IF we had the rule of law, a government wouldn’t be permitted to become accomplice in theft. But this episode is not the first indication that rule of law has died a quiet death some time ago. And I doubt it will be the last.
It’s not a specifically German issue either. Whether we look at the US, UK or any other of our cherished democracies, the state has increasingly been above the law, even though citizens may not yet have fully woken up to the fact. (As one recent example among many, consider the Chrysler bankruptcy and the mockery the Obama administration made of the bankruptcy laws and the rights of the secured creditors, in order to pay off a political debt to the unions.)
Be under no illusion, this is our new reality – and it’s here to stay – governments who don’t lose any time on legal niceties in a ruthless pursuit of their own goals.