German state could buy data even under tax deal, official says

ZURICH (Reuters) - Authorities in North Rhine-Westphalia would buy more leaked Swiss bank data on wealthy Germans seeking to dodge taxes even if a tax pact with Switzerland banning such purchases comes into effect, the German state's finance minister said in a newspaper interview.

Under the pact, German account holders would remain anonymous but Switzerland would impose a retroactive withholding tax on capital in offshore bank accounts and would tax future interest income from those accounts.

"We have indications that money may be flowing into structures which aren't subject to the withholding tax. Swiss banks are very efficient," Norbert Walter-Borjans, finance minister of Social Democrat-run North Rhine-Westphalia (NRW), said in an interview published by Swiss weekly Sonntagszeitung on Sunday.

UBS (UBSN.VX), which according to media reports is one of the banks hit by leaked data bought by NRW, denied on Friday it had advised clients to move money in order to avoid detection by tax authorities.

"In an emergency, we will purchase more data," Walter-Borjans said, when asked whether NRW would buy data if a German-Swiss withholding tax deal, which he has vowed to fight, were to pass.

Walter-Borjans said he was convinced the pact would fail when put to German states and should instead be renegotiated with more favorable terms for Germany.

Walter-Borjan's comments, which came as prominent fellow Social Democrat Sigmar Gabriel likened Swiss banking to organized crime, highlighted that a tax deal agreed by the German and Swiss governments is far from certain to be ratified in time to come into effect next year.

The NRW town of Wuppertal bought one compact disc of UBS data, and Aachen also purchased a CD with Swiss banking data, the Financial Times Deutschland wrote last week. It quoted an insider as saying the UBS data was hefty and included the foundations that helped German clients avoid taxes as well as "big names".

The mining of data purchased from whistleblowers has escalated tensions between Switzerland and Germany over tax evasion.

It also has threatened Switzerland's strategy to make Germany the cornerstone of further withholding tax deals that the Swiss government is seeking to offset pressure for crackdowns on tax dodging, while salvaging secrecy.

Privacy is crucial to Switzerland's $2 trillion offshore wealth management industry. The country has clinched withholding tax deals with Great Britain and Austria as an alternative to automatic exchange of bank information. (Reporting By Katharina Bart, editing by Jane Baird)