Tax evasion

Tax evasion

Any person who provides incorrect or incomplete information to the tax authorities or other authorities about tax-relevant facts, or fails to inform the tax authorities about tax-relevant facts in breach of duty, or fails to use tax stamps or tax stamps in breach of duty, and thereby evades taxes or obtains unjustified tax benefits for himself or another person, shall be deemed to have evaded taxes, Section 370 (1) of the German Fiscal Code (Abgabenordnung - AO). Taxes are deemed to have been evaded if they are not assessed, not assessed in full or not assessed on time, Section 370 (4) sentence 1 HS. 1 AO.

Accordingly, the assets of the tax authorities enjoy the most extensive protection under criminal law. Already the untimely delivery of the turnover tax advance return represents a punishable tax evasion (§§ 370 exp. 4 p. 1 HS. 2, 168 AO). Even those who (recklessly) evade taxes without intent can be fined up to 50,000 euros. Due to the prohibition of compensation pursuant to Section 370 (4) sentence 3 AO, cases of punishable (completed) tax evasion are conceivable even though the tax assessed on the basis of the taxpayer's incorrect information exceeds the tax owed by law, i.e. there is no damage to tax revenue.

Classic cases of evasion include

• Income tax evasion through reduction of income, overstatement of business expenses, in particular also: cases of estimation,
• Income tax evasion in connection with corruption offenses due to the prohibition of deductions pursuant to Section 4 (5) Sentence 1 No. 10 EStG (Income Tax Act)
• VAT evasion by concealment of taxable turnover,
• VAT evasion through irregularities in intra-Community deliveries and exports,
• "VAT carousels",
• inadmissible profit shifting through inflated transfer prices,
• Understatement of import duties by declaring the wrong customs value (e.g. by "under-invoicing", splitting invoices, concealing royalties, etc.),
• Understatement of import duties through incorrect classification in the EZT or false declaration of preferential or non-preferential origin,
• Understatement of import duties or excise taxes by irregular shipment (e.g. "smuggling" [Art. 79 UCC, previously Art. 202 (1) (a) Customs Code] or tobacco tax evasion [Sec. 23 (1) Tobacco Tax Act]) or withdrawal from customs supervision,
• Understatement of excise duties by misrepresentation of the tax object (e.g. lubricating or casing oil instead of heating oil or fuel),
• Understatement of excise duties due to irregularities in the movement under duty suspension or removal from the tax warehouse,
• Understatement of excise duties by unjustified claiming of tax exemption (e.g. according to § 27 AlkStG [previously § 152 para. 1 No. 1 Spirits Monopoly Act], provided that no medicinal products within the meaning of § 2 para. 1, 4 Medicinal Products Act are produced),
• Understatement of excise duties by manufacturing outside a tax warehouse (e.g. "moonshine").

As a criminal defense lawyer, I specialize in criminal tax law and thus in particular in the defense against accusations of tax evasion. The aim of my work is always to bring the proceedings to an end quickly and as favorably as possible for my clients. In the run-up to criminal tax proceedings, my advice and representation includes, in particular, the voluntary declaration of tax evasion.

For intent to commit tax evasion, it is sufficient that the perpetrator considers it possible that he will keep the tax authorities in ignorance of tax-relevant facts and that taxes will be reduced or unjustified advantages obtained through his conduct.

Increased requirements are to be placed on merchants in particular. If a merchant does not inform himself about the tax obligations existing in his trade, this can already indicate his indifference with regard to the fulfillment of these obligations; the same applies if a taxpayer fails to obtain legal advice in cases of doubt (BGH, judgment of 08.09.2011 - 1 StR 38/11 = NStZ 2012, 160 et seq.). If a taxpayer who is not knowledgeable in tax matters chooses a contract structure that deviates from the usual business transaction in order to avoid a tax liability that he believes to be possible, it may be indicative of the acceptance of a tax evasion if he solely assumes his layman's understanding of the law (BGH loc. cit.). This applies to cross-border deliveries, the VAT treatment of which regularly causes difficulties, as well as to legally difficult or unusual domestic transactions.

Causes for the initiation of criminal tax investigations are often:

• control communications between tax offices,
• anonymous reports (especially from former employees and partners as well as unfavorable competitors),
  press reports and
• Complaints in the course of an external audit (tax audit, special VAT audit, customs audit).

Investigative measures are also permissible on the basis of information obtained illegally, such as so-called tax evader CDs (cf. BVerfG, decision dated 09.11.2010 - 2 BvR 2101/09).

Even in the case of an effective voluntary disclosure, proceedings are initially initiated which are later discontinued in accordance with Section 170 (2) of the Code of Criminal Procedure.

An external audit (tax audit) must be interrupted if factual indications of a criminal offense arise during the external audit; the investigation may only be continued once the taxpayer has been notified of the initiation of criminal proceedings (Section 10 of the Tax Audit Regulations). Factual indications of a criminal offense exist in particular,

• if unexplained differences of some weight remain after calculation or verification has been carried out, e.g. the taxpayer explains asset growth with implausible cash inflows, such as loans from relatives, foreign loans or casino winnings,
• in the event of serious accounting deficiencies, in particular conspicuous absence of otherwise generally accepted supporting documents,
• in the case of evidence of concealed or misleadingly designated bank accounts (accounts in a fictitious or foreign name),
• in the case of assets that are significantly undervalued in the balance sheet and liabilities that are significantly overvalued,
• if income resulting from control notifications is not recorded in the accounting records.

After the announcement of the initiation of the criminal proceedings, the external audit is continued or the tax investigation department takes over for a criminal investigation. The taxpayer can now no longer be forced to cooperate (§ 393 AO).

Whether the facts of the tax evasion are fulfilled depends decisively on the tax law regulations. The criminal defense attorney must therefore also have a sound knowledge of tax law - in addition to mastering the particularities of criminal law and criminal procedure.