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Germany Provides Update On 10-Point Tax Evasion Plan

by Ulrika Lomas,, Brussels

12 April 2017

The German Ministry of Finance has published a progress report on its 10-point plan to combat tax evasion, which was first announced in the wake of last year's Panama Papers leak.

The plan, launched on April 12, 2016, outlines the measures that Germany wants to put in place at domestic and international level to combat tax evasion and aggressive tax avoidance. These include:

  • Signing a tax information exchange agreement (TIEA) with Panama;
  • Creating of a single global blacklist of non-cooperative jurisdictions, preferably overseen by the OECD;
  • Urging all states and territories, particularly those with financial centers, to adopt the Common Reporting Standard (CRS) on automatic information exchange;
  • Monitoring compliance with information exchange standards through the OECD Global Forum;
  • Establishing registers of beneficial owners of companies at global level;
  • Networking and standardizing national registries of beneficial ownership;
  • Legislating for the mandatory disclosure of tax avoidance schemes;
  • Introducing stronger penalties for breaches of corporate law;
  • Extending the statute of limitations in tax evasion cases; and
  • Strengthening national anti-money laundering measures.

According to the Ministry of Finance's update, negotiations with Panama regarding a TIEA are ongoing but "difficult." Germany is pushing for a conclusion of these talks in the first half of 2017.

The update notes that there is no plan at OECD level for an official international blacklist, although the European Commission's work on an EU black list of non-cooperative jurisdictions is expected to be completed by the end of 2017.

With regards to international adoption of automatic information exchange, the ministry observed that more than 100 countries have agreed to participate in the CRS, and that information exchange is monitored through a peer review process by the 139-member Global Forum.

While there has been little progress at international level on the creation of beneficial ownership registries, the updated action plan states that the Federal Government adopted a draft law on the implementation of the Fourth EU Money Laundering Directive on February 22. This includes the requirement that member states establish registries of beneficial company ownership.

On the disclosure of tax avoidance schemes, the ministry said that a working group was set up in September 2016 with representation from the federal and state governments to discuss proposals, following which department heads were invited to submit a report on how tax planning arrangements could be reported after the Finance Ministers' conference on December 1, 2016.

The Coalition Government has also agreed to plans to strengthen the law on administrative offense and explore existing corporate criminal law as it relates to multinational corporations. While a draft proposal from the Ministry of Justice and Consumer Protection is still pending, the Ministry of Finance has already brought in stricter sanctions for companies regulated by the German Investment Code and the Securities Trading Act.

With regards to extending the period that taxpayers are legally required to disclose their tax affairs, the updated action plan states that a draft law was approved by the Government on December 21 extending the statute of limitations in cases of tax evasion from 5 to 10 years.

Finally, to combat money laundering, the action plan reiterates that Germany is in the process of adopting the Fourth Money Laundering Directive, and has increased the level of staff at the Financial Intelligence Unit. Germany will also impose heavier fines for breaches of anti-money laundering laws.

TAGS: compliance | Finance | tax | European Commission | tax information exchange agreement (TIEA) | value added tax (VAT) | tax avoidance | law | tax planning | transfer pricing | Germany | standards | penalties | Panama | Investment | Europe | Invest | Investment | Networking | BEPS

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