BGH tightens tax evasion

In its judgement of 27 October 2015 (1 StR 373/15), the Federal Court of Justice ruled that any tax evasion exceeding EUR 50,000 constitutes large-scale tax evasion within the meaning of Section 370 para. 3 sentence 2 no. 1 AO. The judgement published on 5 February 2016 contains two remarkable findings with major practical implications:

1. Tax evasion on a large scale is present for any tax evasion over 50,000 euros.
2. Unity of offence exceptionally evasion is committed by means of the same declaration or if several tax declarations are submitted simultaneously by means of a physical act.

Point 1: The amount above which large-scale tax evasion is deemed to have occurred is not defined by law, although serious consequences are linked to this. Above this threshold, a custodial sentence of at least six months must (exclusively) be imposed, which, according to case law, can no longer be suspended if the amount evaded exceeds millions. A fine is therefore no longer an option from an evasion amount of 50,000 euros. The BGH has thus tightened its own case law. According to previous case law, a limit of 100,000 euros applied here. The Federal Court of Justice argues that the same limit for serious fraud applies with the same threat of punishment. A standardised value limit is intended to provide more legal certainty.

Point 2: In principle, in criminal tax law, the submission of each incorrect tax return must be assessed as a separate offence according to the type of tax, assessment period and taxpayer. In the present case, the tax types VAT and trade tax were added together to determine the penalty, so that the (new) limit of EUR 50,000 was exceeded. This is justified by the fact that the declarations contain the same incorrect information about the tax bases. The court itself recognises that this will generally be the case. This is because it is difficult to imagine making inconsistent statements in the VAT return, the trade tax return and the income tax return or the corporation tax return in the context of determining profits, as the taxpayer would otherwise become entangled in inconsistencies. The exception described above will thus become the rule and therefore represents an immense tightening of the rules. In view of the lowered threshold (see point 1), the question of the "uniform physical act", which is regularly handled electronically in the modern tax world, will in more cases become a question of fate over mere financial losses or deprivation of liberty.

With this judgement, case law has considerably tightened criminal tax law. Legislators have also recently taken action in this direction. Most recently, on 1 January 2015, a new legal regulation made the requirements for a voluntary disclosure exempting from prosecution more difficult. Since then, a self-disclosure is only possible from an evasion amount of over €25,000 if a penalty surcharge is paid (see Betz/Thiede NWB-EV 6/2015, p. 189 et seq.). The surcharge is staggered as follows:

The surcharge is in addition to the tax to be paid in arrears and the often not inconsiderable interest of 6% per year. In addition to the payment of tax arrears, a further prerequisite for exemption from punishment is that the tax office is not already aware of the facts of the case and that the taxpayer fully corrects all offences of a tax type that are not time-barred, but at least the last 10 years.

In the case of tax evasion, the overall conditions for returning to tax honesty are therefore stricter and the threat of punishment is more severe.

Markus Betz is a lawyer and tax consultant at TAXGATE, a tax law firm specialising in transactions, investments and tax compliance.