(Bloomberg) A proposed Swiss-German tax accord is dead and buried amid growing public opposition in Germany to any agreement that’s seen as too easy on evaders, senior members of Chancellor Angela Merkel’s coalition said.

“Recent cases of tax evasion have resulted in mounting sentiment among Germans that evasion is fraud and not mere bagatelle,” said Ingrid Arndt-Brauer, a lawmaker with Merkel’s Social Democratic coalition partner who chairs the Finance Committee in the lower house of parliament. “Any revival of the stalled German-Swiss tax deal is off the table,” she said in an interview.

Death of the tax accord risks further clouding relations between the neighbors already tested by the Swiss decision in a referendum on Feb. 9 to limit immigration from European Union countries including Germany.

Neither Merkel nor Swiss President Didier Burkhalter referred to tax matters after talks in Berlin today. She instead cautioned against any rush to penalize Switzerland over the immigration vote that will take three years to implement.

A withholding tax deal with Switzerland failed in 2012 when the Social Democrats blocked its passage in Germany’s upper house of parliament, the Bundesrat. Similar to Swiss accords signed with Austria and the U.K., it would have preserved client anonymity while allowing tax to be clawed back.

Willingness Evaporates
While the Social Democrats are now in government and able to negotiate a fresh deal, their willingness to do so has evaporated along with revelations of tax dodging by prominent Germans, Arndt-Brauer said. Moves to allow evaders to go unpunished if they declare their assets won’t fly, she said.

Combating tax evasion figured prominently in the German election campaign last year after Bayern Munich President Uli Hoeness reported illicit tax holdings in Switzerland in a bid for amnesty. German feminist writer and television personality Alice Schwarzer, 71, said on her website on Feb. 2 that she had an undeclared Swiss account for decades.

With the tax deal’s passing, German authorities are missing out on “a wealth” of potential revenue that it would have delivered, said Antje Tillmann, the finance-policy spokeswoman for Merkel’s Christian Democratic-led bloc.

Tillmann acknowledged that the outlook for an accord with Switzerland was as good as dead, saying in an interview that she sees “no chance to breathe new life into the tax-exchange deal with Switzerland in this coalition.”

German Finance Minister Wolfgang Schaeuble, a Christian Democrat who criticized the SPD’s stance during the last term, is now relying on an automatic exchange of tax information at the EU level. His ministry is also pushing for a deal among the Group of 20 nations.

The original double-taxation agreement signed with Switzerland “cannot be revived” in its current form, the Finance Ministry said in an e-mailed response to questions.

—With assistance from Catherine Bosley in Zurich and Patrick Donahue and Tony Czuczka in Berlin. Editors: Alan Crawford, Zoe Schneeweiss

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