Tax Swindle Police Raid Companies Across Germany

Prosecutors and police investigating Germany's biggest tax evasion scandal yesterday raided corporate offices across the country.

Prosecutors confirmed that raids had taken place in Munich, Hamburg and Stuttgart - all home to some of Germany's biggest firms - giving rise to speculation that more high ranking executives could have been caught in the net. None of the groups or individuals was named.

The investigations, launched after the head of Deutsche Post, Klaus Zumwinkel, was interrogated last week on suspected tax evasion of around €1m (£750m), have sent shock waves through the German business community and political establishment. Zumwinkel has since resigned.

Unconfirmed reports, pointing to the evasion costing the tax authorities up to €4bn over the years, said that executives, including some equally prominent names, were now owning up to diverting huge sums of money to Liechtenstein to sidestep their tax liabilities.

The raids were triggered after the German equivalent of MI6, the BND, reportedly paid an informant about €5m for data on a CD-Rom pointing to the large-scale evasion naming hundreds of individuals. A finance ministry spokesman, while refusing to confirm the sums involved, said it was "money well spent".

LGT Treuhand, the Liechtenstein trust through which the German managers' wealth was transferred, has said that confidential client data was stolen as long ago as 2002, with an employee later sentenced. The data was supposedly returned in full but some of it, its parent, LGT Bank, said, had now resurfaced. The banking group, controlled by the principality's royal family, said it had lodged criminal proceedings against "a person unknown".

The German government said the information had been properly obtained. The chancellor, Angela Merkel, said she would raise the issue with Liechtenstein prime minister Otmar Hasler in Berlin on Wednesday. The state let endorses strict banking secrecy but insists that it does not favor tax evasion. However, a 1999 BND report said Liechtenstein was a haven for money-launderers, a finding strenuously denied by the royal family.

Peer Steinbrück, German finance minister, said he was examining the case for a pan-European initiative to deal with tax havens on the continent. The scandal has given urgency to a nationwide debate over executive pay but Josef Ackermann, chief executive of Deutsche Bank, said the government should refrain from setting limits on managers' compensation.