|Austrian silver euro coins being used to beat German taxes|
Submitted by cpowell on 02:50PM ET Saturday, July 4, 2009.
Section: Daily Dispatches
Quick Silver: A New Austrian Coin Trick
From Der Spiegel, Hamburg
Saturday, July 4, 2009http://www.spiegel.de/international/europe/0,1518,633772,00.html
Hot tip for German investors: an Austrian silver coin that can be smuggled
legally. It's music to the ears of Germans who bank in Austria. But how long can
the party last?
The object of desire is 37 millimetres in diameter and made of .999 fine
silver. On one side, the coin shows an organ, its country of origin ("The
Republic of Austria"), and its face value: 1.50 euros ($2.12). On the flipside:
"Vienna Philharmonic Silver" and a few musical instruments from the world famous
The coin, known to numismatics as the "Silver Philharmonic," could well drive
Germany's already harassed Finance Minister Peer SteinbrÃ¼ck over the edge.
Because the ounce of silver is a hot tip among German investors -- and a means
of discretely transferring untaxed funds back home.
Austria issued the new coin in early 2008, wisely anticipating the
consequences of the bank collapse, the stock crash and the rising value of
precious metals. The coin was explicitly intended for purposes of investment,
not collection. Bernhard Urban, marketing spokesman of the Austrian Mint,
modestly calls it "unique" in Europe. The story of its success has to do with a
funny little contradiction: As a means of payment with a value of E1.50, the
coin can be used to buy a beer. But nobody in his right mind will take it to the
pub in the first place because the exclusive silver piece is worth -- depending
on the price of silver -- somewhere between E11 ($16) and E14 ($20), and costs
that much at the teller's window.
It's this difference between the face and market values of the coin that
makes it so attractive in the context of international money transfers. The coin
manages -- astonishingly -- to circumvent currency import regulations. A person
travelling from Austria to Germany is allowed to bring E10,000 ($14,000) into
the country without having to declare it at customs. So that person can bring
more than 6,000 Philharmonic coins over the border and in doing so, bring home,
with each trip, more than E110,000 ($156,000) of his hidden Austrian
It's common knowledge that many Germans make use of the discrete accounts in
Austrian banks. But it's equally clear that the days of strict banking
confidentiality are numbered. Bavarian customs officers claim not to have
noticed anything yet. But in Austria, the Philharmonics are already "an absolute
hit," as coin expert Urban proudly proclaims, especially among the Germans, like
the entrepreneur from Munich who picked up the nifty little tip from his friends
at the yacht club.
Since then, the coin trick has been doing the rounds among wealthy Bavarians
who stash their money next door. Because the coin collectors are exchanging
tax-evasion tips galore in chatrooms, the Bundesbank (Germany's central bank) is
not anxious to draw attention to the matter. But senior bankers are abundantly
aware of the problem.
The German Finance Ministry has responded by warning inventive investors not
to get too comfortable. Customs officers suspicious about coins can forward
these concerns. But they can confiscate the silver pieces only if they exceed
the face value of E10,000 ($14,000).
Meanwhile, the Austrian Mint can hardly keep up. It's a four-week wait for
the coin at the Oberbank in Salzburg. There's no question that the Philharmonics
are reaching well beyond traditional coin collector circles. In February 2008
the mint was anticipating sales of three or at most, five million coins; by the
end of the year almost eight million were in circulation. And already in 2009
nearly five million pieces have been bought or ordered.
Of course, Urban denies that the Philharmonic is making life easier for tax
evaders. That certainly wasn't the coin's purpose, he says. It was obvious that
investors would go for precious metals in these uncertain times. "We wanted to
fill a vacuum that the banks have left behind." Which means: for the growing
number of customers who don't trust the investment adviser at their local bank,
the Philharmonic offers a perfect alternative.
It's impossible to know how many Germans are using the coin for investment
purposes and how many for cross-border transfers. What's clear is that the
Bundesbank is not benefiting from the silver boom. German citizens are holding
back on domestic coins at the moment; German coins are good only for collecting,
not smuggling. Silver mintages have become shelf warmers. Now it's too late for
the Bundesbank. The Austrians were first to grasp that in bad times it makes
more sense to mint investment opportunities rather than collector's
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