Criminal tax law

Tax law violations are risk factors under criminal law.

Criminal tax law determines the sanctions for violations of tax laws. In a nutshell, anyone who provides incorrect information to the tax authorities or fails to provide required information violates tax declaration obligations. If taxes are understated as a result, there is a high risk of severe sanctions.

A fundamental distinction is made between

• criminal offences (e.g. tax evasion), which are punishable by a fine or imprisonment, and
• regulatory offences irregularities (e.g. reckless understatement of tax or general minor tax fraud), which can be punished with a fine.

For years, combating international tax evasion has been the focus of prosecution authorities. One reason is that certain types of tax crime, such as cross-border VAT evasion or aggressive tax schemes, cause billions of Euros in losses every year in the EU. In particular, a number of high-profile cases of tax optimization schemes have raised the pressure. The willingness to initiate criminal tax proceedings has further increased.

Infringements of tax regulations regularly trigger criminal investigations in day-to-day business and commercial life. The consequences of violations of tax law have become a risk factor, especially for companies and their management. A penalty or fine can only be imposed if a tax violation is evident. However, it is a frequent problem that there are numerous cases of legal doubt in complex tax law. This is all the more true under the increasing influence of EU law.

And the tax authorities are upgrading. Among other things, the Federal Ministry of Finance has already presented detailed plans for a special unit against tax fraud and tax evasion. It is also being considered to equip the Federal Central Tax Office with its own tax investigation department. These developments are an indication that combating tax evasion will become even more important to legislators in the future.

Anyone facing criminal tax proceedings will find himself in an unknown situation in which special rules apply. Criminal tax proceedings are largely in the hands of the tax authorities. They investigate either on their own discretion or on behalf of a public prosecutor’s office. The role of the tax investigation department is a problem in particular, because it has a dual function. On the one hand, it investigates criminal offenses and administrative offences, which ties it to criminal procedural law and therefore requires it to conduct its investigations objectively. On the other hand, as a financial authority, it establishes the basis for taxation and has to comply with tax procedural law. This parallel existence of two proceedings with different objectives and different rules leads to a potential conflict of interest and is one of the reasons why criminal tax proceedings regularly take a long time and have the potential for conflict.

We also have wide-ranging experience in cross-border criminal tax proceedings. As defence counsel in all stages of the proceedings, including litigation. As advisors in connection with corrections, voluntary declarations and the implementation of appropriate compliance structures. As competent and independent partners for tax consultants and law firms from Germany and abroad who regularly use our services.