Berlin’s answer to tax fraud: more powers, more files, fewer excuses

The German government has rediscovered a favourite Berlin reflex: when the numbers look ugly, add more powers. Finance Minister Lars Klingbeil and Justice Minister Stefanie Hubig have presented a 26-point plan against tax fraud and financial crime, and it is not a modest one. The package reaches from criminal law to corporate reporting, with the familiar promise that if the state can see more, it will somehow control more.

At the centre stands a harder line on tax evasion. The government wants to classify it as a felony, which would lift the standard sentencing range to one to 15 years. Self-disclosure would also lose its automatic immunity. Whether it can still reduce a sentence is left open, which rather neatly captures the spirit of the plan: stricter, broader, and not exactly shy about keeping citizens and companies under pressure.

Crypto transactions are another target. The government wants to use blockchain analysis as an investigative tool and to pay closer attention to concealment services for crypto assets. The stated goal is that no anonymisation of transactions should remain undetected. In Berlin, privacy apparently counts as a problem the moment it gets in the way of the tax office.

Cash-heavy sectors are not being spared either. Electronic cash registers are to become mandatory, so that cash turnover can be recorded more completely and revenue cannot simply be deleted later, shifted around or kept outside the system. For businesses, that means less room for improvisation. For the state, it means more control over daily transactions, which is, unsurprisingly, the point.

The investigative state is also getting a software update. The plan includes buying datasets, working more closely with whistleblowers, setting up a joint centre against tax and financial crime, and creating a data analysis centre that uses AI-supported evaluation. Companies would also face near-real-time VAT reporting, longer retention periods for booking records and, for certain foreign firms, mirror servers in Germany.

The official aim is to stop VAT fraud, hidden transactions and lost evidence earlier. The scale of the problem is not small: reports cited in connection with the plan put the annual damage from classic tax evasion and undeclared work at around 92 billion euros. That is a serious figure, and no serious government could ignore it. But Berlin’s instinct remains predictable. Instead of first asking why compliance fails so spectacularly, it reaches for more obligations, more data and more ways to pry. The state rarely misses a chance to expand its reach; it just calls it enforcement.

Written by Sandy van Dongen sandy.vandongen@alpineweekly.com