The most recent legal reforms on reporting obligations and the exchange of information contain, on the one hand, criminal tax law provisions themselves and, on the other hand, have an impact on criminal tax law. Through reporting and the exchange of information, the tax authorities are gaining an ever better data situation for assessment and, if necessary, criminal tax investigations.
Serious tax evasion when using third-country companies
With the Anti-Tax Avoidance Act of 23 June 2017 tax evasion using a covert third-country company was included in the catalogue of particularly serious tax evasion (Section 370 para. 3 sentence 2 no. 6 AO as amended). As a result, it is no longer possible to make a voluntary disclosure in such cases and the limitation period for prosecution increases from five to ten years.
No voluntary disclosure upon discovery of the offence
In the interplay between criminal tax law and the exchange of information, the provision of Section 371 para. 2 no. 2 AO is currently being discussed. According to this provision, a voluntary disclosure exempting from prosecution is excluded if a tax offence has already been (partially) discovered and the offender knew or should have expected this. According to the prevailing view, the offence is discovered if the bank documents are compared with the tax returns and differences are found. Control notifications without a comparison are not sufficient for the offence to be discovered. Whether the automatic exchange of information under the OECD can lead to a different assessment has not yet been clarified.
In a recent ruling (judgement of 09.05.2017, 1 StR 265/16), the Federal Court of Justice (BGH) stated that the perpetrators of a crime can also be private individuals and foreign authorities if it can be expected that they will pass on their knowledge to the competent authority. In the case of concealed tax sources, according to this judgement, it is conceivable that an offence may be discovered even before a comparison with the taxpayer's tax returns if, according to criminal experience, the manner of concealment is a significant indication of incomplete or incorrect information. Nationals of foreign authorities can be considered as the perpetrators of the offence if the state in question provides international legal assistance and it is likely that this will be granted.
After the Automatic exchange of information the authority of a foreign state participating in the exchange is obliged to forward certain data to other participating states, such as Germany, but on fixed dates, annually on 30 September. At least in the case of account data, it is therefore to be expected that it will be passed on, so that according to the logic of the Federal Court of Justice, the offence would already have been discovered upon notification abroad. On the other hand, it is argued that there is no criminal experience to the effect that capital gains realised abroad are undeclared income. Furthermore, it is argued against the discovery of the offence by foreign authorities that foreign authorities generally do not have the necessary expertise in German tax law to make a discovery.
In addition to the discovery of the offence, the exclusion ground of Section 371 (2) no. 2 AO requires that the offender is aware of the full or partial discovery of the offence. According to the Federal Court of Justice, this subjective component should only be of minor importance (judgement of 50 May 2010, 1 StR 577/09). The Local Court of Kiel even assumes that the general press and radio coverage of the purchase of "tax CDs" can already lead the taxpayer to expect that his tax evasion has been discovered, at least in part (judgement of 27 November 2014 - 48 Ls 1/14, 48 Ls 545 Js 46477/13).
Summary
The interplay of reporting obligations and data exchange is leading to an increasingly complete data situation for the tax authorities. The political discussion in Germany about moving away from the flat-rate withholding tax in favour of standard taxation of investment income should also be seen against this backdrop. For German taxpayers who have undeclared foreign income - depending on the country in which the source of income is located - the door to voluntary self-disclosure with exemption from prosecution will close from September 2017. However, even if there are doubts regarding the discovery of offences and possible risks, a subsequent declaration may still be appropriate. In other cases, it is important to consider whether imminent criminal tax proceedings can be accepted or what defence advice can be provided in advance.
In practice, the voluntary disclosure options that have now dried up are often characterised by the fact that the documents and information required for a complete and properly prepared subsequent declaration are simply no longer available, which means that the path to a voluntary disclosure that exonerates the taxpayer from prosecution appears to be blocked. In other cases, the required completeness is often associated with the incrimination of third parties or unintended discoveries, so that the threat of criminal tax proceedings is accepted; in contrast to voluntary disclosure, the taxpayer does not have to incriminate himself and can therefore hope that not all undeclared facts that are not time-barred have been discovered as a result of the investigation measures.
This article is the conclusion of a series. You can access the other parts here.
Markus Betz, tax consultant and lawyer, is an expert in criminal tax law, in particular in cross-border matters, in the area of capital investments and VAT. He also has many years of experience in financial and corporate transactions to avoid tax risks and tax-optimised structures.
