A HUGE tax-evasion investigation that has come to light in the past week has shocked many in Germany, not only because it may expose hundreds of wealthy citizens, but also because of the way in which investigators obtained the evidence.
German media said the BND intelligence service, with a green light from Berlin, paid an informant over 4 million for a disc containing Liechtenstein bank data on more than 1,000 suspected tax dodgers.
The finance ministry, which expects a tax wind
fall of more than a 1 billion as a result of the investigation, insists that the money paid was "well spent".
Liechtenstein says the informant, reported to be in hiding in Australia, is a criminal who stole the data and may have tried to blackmail its banks.
In Germany, a poll has shown that 52 per cent of voters say the BND should not have paid for the information, while 41 per cent say the payment was justified.
"Friends from the underworld," the Financial Times Deutschland said in a headline. "The state as a criminal?" asked Westfalenpost newspaper.
The investigation, which targets people suspected of parking money in secret accounts in Liechtenstein to evade tax, has sparked a diplomatic row with the tiny alpine principality and cost Klaus Zumwinkel, the chief executive of Deutsche Post, (national postal company] his job.
The scandal has now taken on the proportions of a witch-hunt, with raids across the country on businesses and private residences.
The chief guardian of the funds in the case is Liechtenstein's LGT Bank, which now has 300 full-time German investigators assigned to it.
It is understood Mr Zumwinkel and others kept the money hidden in Liechtenstein, using foundations that entrust the management to a trustee. Interest and capital gains was then usually funnelled discreetly to other secret bank accounts.
Kurt Beck, the head of Germany's Social Democrats, accused Liechtenstein of "robber-baron" policies and said that sanctions might be needed to force the tiny state to crack down on tax-evaders.
Liechtenstein, a country of 35,000 sandwiched between Switzerland and Austria, depends heavily on its secretive banking sector. It is one of three countries on the Organisation for Economic Co-operation and Development's (OECD) blacklist of unco-operative tax havens, alongside Andorra and Monaco.
Yesterday, Angela Merkel, the chancellor, met Liechtenstein's prime minister, Otmar Hasler, and asked for help in "clearing up the cases of tax evasion that have been discovered", she said.
She pressed for progress towards an anti-fraud agreement between the EU and Liechtenstein and urged the principality to co-operate with the OECD in curbing unfair tax competition.
Mr Hasler said Liechtenstein "is a modern financial centre, and we are also willing and ready to enter into co-operation.
Mrs Merkel brushed aside comments from Liechtenstein's ruling Prince Alois, who argued that Germany should get its own tax system under control.
"I find that such theories… are not sustainable, not right and not helpful for our relations," the chancellor said.
Frank Decker, a political scientist at Bonn University, said that, while many middle-class voters were disgusted by the idea of wealthy people shifting their money abroad, they were also concerned at the way the state had handled the affair.
"It has the after-taste of not being legitimate, of the state having crossed a line," he said.
The full article contains 563 words and appears in The Scotsman newspaper.
