BC-EU--Switzerland-Germany-Tax Evasion, 1st Ld-Writethru,0303

Swiss plan no retaliation in German tax disk plan

GENEVA (AP) -- The Swiss government said Wednesday it would hold more talks with Germany on a new exchange to enhance cooperation in tax evasion matters, despite anger over German plans to buy stolen data on tax cheats with accounts in Switzerland.

Finance Minister Hans-Rudolf Merz condemned the theft of a disk from an unidentified bank, saying the individual who took it should be punished. His German counterpart Wolfgang Schaeuble was quoted as telling local media Tuesday that "the decision has in principle been taken" to buy the data on some 1,500 investors.

Merz told a news conference that the purchase would damage Swiss-German relations.

The case has inflamed passions in Switzerland, which treasures its tradition of banking secrecy despite recent government decisions that have seen it watered down after pressure from the United States, France and Germany.

But Merz said retaliating against Germany for buying the data would be counterproductive.

"Germany is our most important economic partner," he said. "There are no reasons to suspend ... negotiations."

Negotiations with its northern neighbor over the so-called double taxation agreement would likely be concluded in March, Merz said.

The deal will mirror treaties that Switzerland has already signed with other countries, including the United States, and abolish the difference between tax fraud and tax evasion. Switzerland has used this distinction in the past to deny assistance to foreign governments seeking information on their citizens suspected of hiding money in Swiss vaults.

By signing such treaties Switzerland is following the lead of its tiny neighbor Liechtenstein, which last year declared it would overhaul its financial system to make tax evasion a thing of the past.

In the long term, Merz said "it's not in the interest of our country to attract untaxed foreign money. The financial center has to face this reality."