German cabinet agrees rules for tax evasion fight

BERLIN, Aug 5 (Reuters) - German Chancellor Angela Merkel's cabinet has agreed on how to implement a new law to combat tax evasion and sanction tax havens, Finance Minister Peer Steinbrueck said on Wednesday.

The law, which comes into effect in 2010, will allow the Finance Ministry, in coordination with other ministries, to single out people and entities for sanctions on their operations in Germany, Steinbrueck said.

"The rules unequivocally cover jurisdictions and also sovereign states that are not cooperating in efforts to expose tax evasion and tax fraud," he told reporters after a weekly cabinet meeting.

"Those states and jurisdictions that do not meet the OECD (Organisation for Economic Cooperation and Development) standards should put on a list and federal law should be brought to bear," he added.

The Paris-based OECD maintains a so-called "grey list" of countries that have agreed to improve financial transparency standards but have not yet signed the necessary international accords.

Steinbrueck had attempted to get the cabinet to allow the Finance Ministry to unilaterally designate countries as tax havens deserving sanctions, but was forced to backpedal after resistance from business.

The Finance Ministry will now have to come to agreement with the Foreign and Economy Ministries before any sanctions decisions can be made.

Steinbrueck has led Germany's charge against tax evasion, and has put pressure on nations like Switzerland and Luxembourg to step up efforts to combat bank secrecy.

Switzerland, whose private banks manage around $2 trillion of foreign wealth, aims to secure 12 new bilateral tax deals by the end of 2009 which could allow it to be removed from the OECD grey list.

Steinbrueck, who in the past started a row with the Swiss over tax evasion by comparing them to "Indians" running scared from the cavalry, said talks between Berlin and Berne would soon be underway.

"We have a date with Switzerland, working-level negotiations will begin this month," he said. (Reporting by Brian Rohan; Editing by Andy Bruce)