Child Benefit Evasion

Tax evasion through unauthorized receipt of child benefits

Unauthorized receipt of child benefits is a frequent cause for tax and criminal tax law decisions by the courts. These cases are particularly frequent in practice, as child benefit is one of the most frequently granted subsidies by the state. In addition, after the initial positive decision by the responsible state agency without cause, there is usually no review of the requirement on the part of the office until the children reach the age of majority. This is because, in accordance with the first sentence of Section 68(I), the competent family benefits office must be notified immediately of any changes in circumstances that are relevant to the benefit or about which declarations have been made in connection with the benefit. Accordingly, the recipient of the child benefit is obliged to notify. This, of course, opens the door to abuse of this instrument - whether consciously or unconsciously.

According to Section 31 Sentence 3 EStG, child benefit is a tax refund. As such, unauthorized child benefits can also be the subject of tax evasion within the meaning of Section 370 AO. Paragraph I no. 2 of this section stipulates that anyone who, in breach of duty, keeps the tax authorities in ignorance of tax-relevant facts and thereby evades taxes or obtains unjustified tax advantages for himself or another person is liable to prosecution. The family benefits office responsible for child benefits is a tax authority within the meaning of Section 370 (1) No. 2 AO pursuant to Section 6 (2) No. 6 AO. The objective facts are therefore fulfilled.

However, the findings on the subjective elements of the offense, i.e. the intent to evade, without which a mere tax evasion is not punishable, are often incorrect. For this reason, the Kammergericht, for example, overturned a judgment of the Regional Court in a decision dated December 14, 2016, file number: (4) 121 Ss 175/16 (205/16). In its decision, the Kammergericht criticized the findings of intent by the Berlin Local Court as well as the Berlin Regional Court. The defendant had indeed omitted to inform the family insurance fund that her children no longer lived in her household, but with their father in Turkey. She had also been informed separately of her duty to report. For this reason, the family benefits office also demanded the return of the child benefits paid. However, the conviction under § 370 AO depended on the defendant's intent. The lower courts had concluded this without further ado from the circumstances. The Court of Appeal did not consider this to be sufficient. Because here it was just doubtful whether a conditional resolution or conscious negligence was present. Negligent commission was not ruled out and the intent was not already evident from the manner of commission, so that a significantly greater effort of substantiation would have been necessary. Therefore, the Court of Appeal referred the case back to another chamber of the Regional Court.