Federal Minister for Finance Lars Klingbeil and Federal Minister for Justice Dr Stefanie Hubig have jointly presented an action plan designed to tackle tax and financial crime in Germany with far greater determination. Although no specific draft legislation has yet been tabled, the planned measures are far-reaching and affect both businesses and private individuals.
New investigative structures and digitalisation
A Joint Centre for Combating Tax and Financial Crime is to be established within the customs service, where tax investigators from the federal states and federal customs investigators will work together. The Joint Counter-Terrorism Centre serves as a model for this. In parallel, plans are in place for a data analysis centre that will consolidate financial data on a central platform and use artificial intelligence to identify suspicious patterns.
Of particular relevance to businesses: from 1 January 2028, a requirement to use a till will apply to businesses with an annual turnover of more than 100,000 euros. In addition, an electronic VAT reporting system will be introduced, through which companies must report their turnover promptly and on a transaction-by-transaction basis. Furthermore, the retention period for accounting documents is to be extended from the current ten years to 15 years in future.
Stricter penalties for tax evasion
The proposed penalty range for particularly serious cases of organised tax crime is to be increased to up to 15 years’ imprisonment. Serious tax offences are also to be classified as crimes, which entails a minimum prison sentence of one year. This has direct consequences for criminal proceedings: in the case of crimes, neither a summary penalty order nor a simplified dismissal of proceedings is possible. Such cases would then have to be heard in open court.
End of voluntary disclosure exempting from criminal liability
Particularly far-reaching is the planned abolition of voluntary disclosure, which currently offers immunity from prosecution, in its current form. Under current law, taxpayers can obtain immunity from prosecution under Section 371 of the Tax Code if they pay the evaded tax and a surcharge of between 10 and 20 per cent. This scheme is to be abolished because, in the view of the ministries, it creates the wrong incentives: those who fear detection come forward, whilst those who feel secure remain silent. It is not yet clear what arrangement will replace the current voluntary disclosure scheme.
Higher fines for businesses and international cooperation
In future, it should be possible to impose significantly higher fines on companies that evade tax. In the case of serious offences, there are also plans to publicise the sanctions. At European level, the European Public Prosecutor’s Office is to be strengthened and better funded so that it can prosecute cross-border tax crime more effectively.
What does this mean for businesses and individuals?
Although draft legislation has yet to be introduced, the action plan sets out a clear direction: the state intends to pursue tax evasion more rigorously, increase the likelihood of detection and, at the same time, significantly restrict the scope for settling such cases out of court. Anyone who has so far relied on voluntary disclosure as a last resort should follow developments closely. If you have any questions regarding tax compliance or existing risks, it is advisable to seek advice from a tax adviser or solicitor at an early stage.
Source: Haufe: Tax
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