Sat Mar 31, 2012 6:14pm EDT
By Erik Kirschbaum and Katie Reid
BERLIN/ZURICH, March 31 (Reuters) - Switzerland has issued arrest warrants for three German civil servants, accusing them of industrial espionage for buying the bank details of German tax evaders, the finance ministry of the German state of North Rhine-Westphalia (NRW) said on Saturday.
In the latest chapter of an ugly dispute over tax evasion that has strained ties between the two neighbours, a spokeswoman for the ministry confirmed a report about the arrest warrants due to appear in Sunday's Bild am Sonntag newspaper.
The three Germans, who are tax investigators, could be arrested if they enter Switzerland, the newspaper said.
News of the warrants emerged as the two countries worked over the weekend to salvage a landmark deal on taxing secret offshore accounts, after the main German opposition party, the SPD, said the plan was full of loopholes.
Chancellor Angela Merkel's centre-right coalition needs the backing of SPD-controlled states to push the tax deal through the Bundesrat upper house, but SPD state premiers have said concessions offered by Switzerland do not go far enough.
Switzerland's strict bank secrecy code has helped it build a $2 trillion offshore financial sector, and a pact with Germany would protect this banking tradition in return for a punitive Swiss-levied tax on German-held accounts.
The Swiss have come under intense pressure over the past few years from several countries trying to clamp down on tax evasion - notably the United States - and in Germany's case the strain has already led to a war of words between the Swiss and their northern neighbours.
One Swiss politician likened former German finance minister Peer Steinbrueck to a Nazi after he called for a "carrot and stick" approach to tax havens like Switzerland.
Thomas Mueller, a member of the Swiss centre-right Christian People's Party, said of Steinbrueck at the time: "He reminds me of the generation of Germans from 60 years ago who went through the streets wearing leather coats, boots and (Nazi) arm-bands."
Steinbrueck, who said he had received threatening letters from Switzerland, said the Nazi comparisons were "unacceptable".
GERMAN ESPIONAGE SUSPECTED
In the latest row, some Swiss believe they have already made enough concessions to Germany and should go no further.
"You can assume that we won't vote for the deal under such circumstances," Swiss People's Party politician Hans Kaufmann was quoted as saying in the Swiss daily TagesAnzeiger on Saturday, while a spokesman for the Swiss Bankers Association told the paper the changes only made the agreement worse.
The Swiss attorney general, putting the ball in the German court, issued a blunt statement on Saturday saying "There is a concrete suspicion that specific orders from Germany were issued to use espionage to obtain information from Credit Suisse."
"The attorney general has asked German authorities for assistance."
Hannelore Kraft, state premier of Germany's most populous region, told Bild am Sonntag she was appalled by the warrants.
"It's an outrage," said Kraft, who is seeking re-election in a vote on May 13. "The NRW tax investigators were simply doing their job tracking down German tax dodgers who stashed undeclared money in Swiss banks."
Germany has made several previous efforts to catch wealthy citizens avoiding taxes, often using data on compact discs.
In February 2008, police raided homes and offices in cities across Germany, targeting about 1,000 people in a huge tax evasion probe after the government paid an informant millions of euros for a compact disc holding Liechtenstein bank data.
In 2010 several German states, including NRW, said they had bought compact discs containing Swiss bank data from whistleblowers as part of a drive to flush out tax evaders. That prompted thousands of Germans to declare their financial holdings to avoid risking jail sentences.
DISPUTE WITH USA
The federal government gave state authorities the go-ahead to buy the information even if it was obtained illegally. Germans have an estimated 150 billion Swiss francs ($200 billion) hidden in secret Swiss accounts.
The Swiss are also involved in a long-running tax dispute with the United States, which is investigating 11 banks including Credit Suisse and Julius Baer for helping Americans evade taxes.
Banks are likely to have to pay hefty fines and hand over thousands of client names to end the U.S. investigations, but the issue should not have a big impact on assets as most have already closed the accounts of U.S. offshore clients, after UBS paid $780 million to settle criminal charges in 2009.
One of the best known whistleblowers is former Julius Baer banker Rudolf Elmer, who helped bring the WikiLeaks website to prominence three years ago when he used it to publish client details from Julius Baer to expose tax evasion.
Elmer, who was recently released from Swiss investigative custody over alleged breaches of Swiss bank secrecy laws, ran the Cayman Islands branch of Julius Baer until he was fired in 2002.
Julius Baer, which has denied its Cayman Islands branch was used for tax dodging, has said Elmer waged a personal vendetta against the bank after it refused his demands for compensation following his dismissal.
Last year, Julius Baer paid a fine to close a tax probe by German authorities, who have also raided the offices of Credit Suisse.
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