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UPDATE 2-Germany eyes govt-owned banks in haven crackdown

Published 04/07/2009, 04:48 PM
EXAH
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* Steinbrueck widens tax evasion clampdown to banks

* Says banks with govt stakes should not use tax havens

* Says steps have been taken as part of clampdown on evasion

(Adds Financial Times Deutschland report)

By Noah Barkin and Ed Taylor

BERLIN/FRANKFURT, April 7 (Reuters) - German Finance Minister Peer Steinbrueck has signalled that he plans to rein in domestic banks that do business in tax havens and will act first against those partially owned by the government.

Asked by Berlin's taz newspaper if it made sense to prevent banks in which Germany has taken a stake, such as Commerzbank , from doing active business in tax havens, Peer Steinbrueck told the newspaper: "The answer is yes."

He declined to name which territories would count as tax havens, but said: "We have already taken the first steps. We will see what happens in the next few weeks."

Asked for more details on the anti-tax evasion measures, Steinbrueck told the newspaper: "I am not announcing anything here ... Suffice it to say, we will take care of this problematic situation."

As part of a government rescue package, Germany has pledged to take a 25 percent stake in Commerzbank. The government also owns an 8.7 percent stake in Hypo Real Estate and plans to take full control of it.

Steinbrueck, a member of the centre-left Social Democrats (SPD), has spearheaded a crackdown on countries with bank secrecy laws he believes encourage tax dodging.

In the past he has named Switzerland and Liechtenstein as hindering efforts to clamp down on tax evasion.

He has also proposed a law forcing German companies that do business in suspected tax havens to reveal these activities to the government. Chancellor Angela Merkel's conservatives have resisted the draft legislation, saying it goes too far.

In a separate report in the Wednesday edition of the Financial Times Deutschland, Steinbrueck signalled closer tax surveillance of individuals in Germany making over 500,000 euros per year.

The paper said this would include random audits and forcing wealthy individuals to provide more extensive proof of their income than in the past -- steps the conservatives also oppose.

"It is not enough to act at the international level if we can't pursue this domestically," Steinbrueck told the newspaper.

SWISS OPERATIONS

Commerzbank, Germany's second largest bank by market value recently bought Dresdner Bank AG and has two private wealth management units in Switzerland, Commerzbank (Schweiz) AG and Dresdner Bank (Switzerland) Ltd.

Dresdner Bank Switzerland had 293 employees at end-2008 and 14,000 wealth management clients, mostly non-German, a Dresdner Bank spokesman said. Exact 2008 figures for Commerzbank (Schweiz) AG were not available.

"We take the prevention of tax dodging very seriously," a separate spokesman for Commerzbank said in response to Reuters queries. "Commerzbank distances itself clearly from illegal practices and has taken preventive measures."

The finance ministry did not return calls seeking comment on Steinbrueck's remarks.

In the taz interview, Steinbrueck also touched on the issue of hedge funds, saying European Union proposals to regulate them did not go far enough.

A draft EU proposal obtained by Reuters on Monday showed that Brussels wants all managers of hedge funds and private equity funds to be registered, ensure they hold a minimum level of capital and disclose information on borrowing to regulators.

"The EU proposal contains good ideas, but it doesn't go far enough," Steinbrueck said. "I want to force the funds to use more of their own money when doing business and to keep risks on their books." (Reporting by Noah Barkin and Edward Taylor)

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