The initiation of criminal tax proceedings by German tax offices, mostly as a result of innocent mistakes, according to the motto “shoot first, ask questions later” is by now common practice, which some managing directors have already experienced painfully at first hand. The core question here is usually the demarcation between simple error correction on the one hand and (actually undesirable) punitive voluntary declaration on the other.
On 23 May 2016, the Federal Ministry of Finance issued a Decree on the Application of the Fiscal Code (AEAO) regarding Section 153 on the question of the delimitation of the declaration of rectification pursuant to Section 153 AO and voluntary disclosure pursuant to Section 371 AO. Paragraph 2.6 states: “If the taxpayer has set up an internal control system which serves to fulfil tax obligations, this may be an indication that there is no intention or negligence, but this does not exempt the taxpayer from examining the individual case in question”. The message to the legal representatives of companies is that a coherent tax compliance management system (CMS) serves to avoid allegations of organisational failure and thus significantly reduces the probability of the initiation of criminal tax investigations. Part I of following paper will present the history and necessity of a tax CMS. Parts II and III then present case studies from our daily consulting work. In Part IV, we share practical experiences in setting up tax compliance systems.
Tax Advisor, Managing Director, LM Audit & Tax GmbH, München
Lawyer, Tax Advisor, LM Law Rechtsanwaltsgesellschaft mbH, München
Certified Public Auditor, Tax Advisor, LM Audit & Tax GmbH, München