A Swiss spy allegedly monitoring German finance officials who hunt cross-border tax cheats also ran a mole in a state finance ministry office, media reports said Thursday.
If confirmed, "the scandal has reached a new dimension", charged Norbert Walter-Borjans, finance minister of the affected state of North Rhine-Westphalia, Germany's most populous.
"It's hard to believe that a spy thriller like this happened not in the movies but on our doorstep," he fumed in comments to the Koelner Stadt-Anzeiger daily.
German prosecutors said last Friday that police had arrested a Swiss man identified only as Daniel M., 54, in a Frankfurt hotel room, accused of carrying out espionage activities since 2012.
Die Welt daily reported the man's alleged mission was to identify German tax investigators involved in the purchase of "tax cheat" data CDs, which have upset German-Swiss relations in the past.
Berlin on Tuesday asked the Swiss ambassador, Christine Schraner Burgener, to clarify the case.
Bild newspaper reported the same day that the alleged spy was a former police officer and a double agent, who at one stage had spied for Germany on Switzerland.
Now a joint report by the Sueddeutsche Zeitung daily and public broadcasters NDR and WDR said the Swiss spy had run a paid informant inside the NRW finance ministry.
The mission was to find out how, and which, German finance officials had got their hands on the CDs with lists of bank account holders in foreign tax havens.
The information provided reportedly helped Swiss authorities file charges of breaching Swiss banking laws and economic espionage against three German tax investigators.
Several German states have over recent years paid millions to unknown sources for the CDs, which have listed German citizens' account information with several Swiss and Liechtenstein banks.
Many of Germany's rich, powerful and famous have as a result had to issue public apologies for stashing away their wealth abroad and paid back-taxes and fines.
The threat of dawn raids compelled thousands more German tax cheats to come forward and report their accounts abroad, and pay back taxes on the interest earned plus fines.
North Rhine-Westphalia alone has bought 11 CDs, which it says have led 120,000 German citizens to self-report Swiss bank accounts.
They have paid back billions of euros in taxes they owed, finance authorities have said.
In May 2015, the EU and Switzerland signed an agreement on the exchange of bank data from 2018, which will effectively end the Swiss tradition of bank secrecy for members of the bloc.