Fraudsters beware

Judges of the German Constitutional Court issued a landmark ruling on Tuesday permitting the use of stolen information in cases brought against tax evaders.

The Karlsruhe-based court ruled against a German woman's claim that the investigation into her case was "illegal" because it was based on a stolen CD purchased by Germany's BKA intelligence agency in 2008.

Authorities in Bochum used information on the disc - containing account information from a bank in the small alpine tax haven of Liechtenstein - as grounds to search the woman's apartment, to which she objected.

The court rejected the claim, ruling instead that such police searches are legal and all evidence obtained through them admissible.

A dangerous precedent?

Despite the financial benefits for the state, tax lawyer Jens Schmidt of the international law firm White and Case is not happy with the decision, mainly because it effectively puts state prosecutors above the law.

"I don't really see this as a positive development," he told Deutsche Welle. "There's always this consideration in the background - the principle is, state prosecutors aren't allowed to do anything illegal. But then they don't draw the conclusion - as you would do for instance under US law - that this makes the whole investigation impermissible."

But for Thomas Eigenthaler of the German Tax Workers Union, tax investigators have a duty to get information about tax cheats any way they can.

"Tax investigators and tax workers need clarity," he commented. "As far as we're concerned - if you can buy the data, you have to buy the data, and the political parties that deny this will gain a reputation for protecting tax evaders."

Sudden honesty

Before Tuesday's ruling, Germany's 16 federal states had been divided over using the data to investigate tax evaders. But now authorities in all states will be able to prosecute tax evaders, irrespective of how evidence is gathered.

In February, authorities in the state of North-Rhine Westphalia bought a stolen tax CD for 2.5 million euros ($3.4 million) containing information on over 1,000 accounts at a Swiss bank.

At least six more such CDs have since been bought by German authorities, at a cost of several million euros each. For the state it's probably very good business: It is estimated the tax man could stand to receive up to a billion euros in back taxes thanks to the CDs.

In response, around 20,000 Germans turned themselves into the authorities, resulting in surpluses of over one billion euros in government coffers.

Author: Gabriel Borrud, Ben Knight (AP, AFP, dpa)
Editor: Chuck Penfold