Tax Scandal Raises Questions About European Foundations

A headline-grabbing tax scandal in Germany is raising questions about how European countries regulate foundations.

According to The New York Times, German authorities are investigating hundreds of people for possibly evading taxes. The investigation’s most prominent target has been Klaus Zumwinkel, who resigned last week as the chief executive of the German postal service after the police charged him with evading $1.46-million in taxes by forming a foundation in Liechtenstein.

According to news reports, Mr. Zumwinkel’s foundation, with assets of $17.5-million, had the mailing address of his vacation home in Italy.

Mr. Zumwinkel and his lawyers have not commented publicly on the allegations. However, the German news media said that shifting assets to foundations abroad is a well-known method of dodging Germany’s high tax rate.

In Liechtenstein, foundations are not required to serve a charitable purpose and are allowed to give money to founders or their family members. The country has one of the largest number of foundations in Europe — at least 40,000 — and attempts to impose laws that would require them to be more like American grant makers have failed.