The German and Swiss governments aim to sign a deal this week on taxing money stashed by German citizens in secret accounts in the Alpine state, according to a German government source.

The terms of the deal, struck in August, could set a model for agreements between Switzerland and other countries. The terms still require approval, however, by the Swiss and German parliaments, and could run into difficulties.

German states run by the Social Democrats want to block it when it reaches the upper house of parliament, where states are represented and where the ruling coalition does not hold a majority. They have complained it contains lazy compromises.

Under the deal, existing funds will be taxed at between 19 and 34 percent, based on how long the money has been stashed away and the capital gains, while future investment income and capital gains would be taxed at 26 percent, in line with the flat-rate withholding tax in Germany.

Strict secrecy has helped Switzerland build a $2 trillion offshore financial sector, but it has faced an international campaign in recent years against tax evasion as cash-strapped governments seek to boost revenue.

Citizens of neighboring Germany -- keen to claw back funds as the worsening euro zone debt crisis expands its role as the region's main paymaster -- have an estimated 150 billion Swiss francs ($203 billion) in secret accounts.

(Reporting by Thomas Seythal; Writing by Alexandra Hudson; Editing by David Hulmes)

Germany