“A la guerre comme à la guerre” seems to have been the motto of the German government, which instructed its secret services to pay an infidel employee of a Vaduz bank for reserved information, in order to obtain the actual names behind the anonymous numbered accounts sitting in one of several European tax havens. Angela Merkel’s government has also transmitted the data to the fiscal authorities of other countries, when it ran into tax evaders that were non-German residents.  Assets and income subtracted to national taxes are being reclaimed, and top managers see their heads cut off, such as in the case of the President of Deutsche Post-DHL, Klaus Zumwinkel. The company had to destroy thousands of printed booklets: they praised the social and ethical responsibility of its management.

  The unprecedented move by the Merkel government reflects the growing frustration of many European states, confronting steep welfare state bills, while their wealthiest citizens elude the taxman. On the one hand, the middle class is pressuring for tax cuts, on the other companies threaten to offshore their activities unless their tax burden is not brought into line with the standards of the foreign competition. Nowadays capital is ubiquitous, and countries of residence of people of great wealth such as actors, sportspeople and rentiers can be notoriously evasive when it comes to disclose fiscal data. Thus, it is the bulk of employees and self-employed that ends up shouldering the fiscal burden and paying for everybody else. The root cause of this phenomenon is the shift in favor of capital and to the detriment of labor that has occurred in global income distribution in recent times. It is as if Marx had been posthumously vindicated: workers do get poorer in a capitalist system, if the welfare state is not there to redistribute wealth via its mechanisms.

  For more than a decade, the OECD has tried to address this problem, but with scant results. The concept of harmful tax competition has been introduced. It is made of three criteria: lower taxation for non-residents with respect to local citizens and firms; absence of transparence (impenetrable banking secrecy), and, finally, the refusal to exchange fiscal information, even in penal contexts.

  Blacklisted are not only the traditional centers of offshore finance, places like Cyprus, Liechtenstein, Andorra, Monaco, San Marino, Panama, and Singapore; also Switzerland, Austria, and Luxembourg fall under the rubric of harmful competition. In fact, fiscal harmonization within the EU is hampered, and this is a major hindrance to the regular functioning of the Single Market.

  The threat of reprisals against non-complying countries is not very credible, when ruling classes in high-taxation states are complicit with tax evasion, if not actively participating in it. If this weren’t so, minor states wouldn’t be able to withstand pressure from major states for long. It is in such context, that the heterodox move made by the German state finds its logic. For its part, Italy is asking Vaduz to confirm the data received from Germany: it’s like asking a chronic sinner information about virtue! Nevertheless, we shouldn’t underestimate the new, tougher Italian approach vis-à-vis footloose tax-payers, such as Valentino Rossi and Dolce & Gabbana.