Decline in Corporate Tax Audits Observed
In recent years, the number of tax audits on companies in Germany has seen a significant decrease, primarily due to resource constraints and shifting administrative priorities. This trend, coupled with broader tax policy changes, has raised concerns about the potential impact on federal and state budgets.
According to a survey, the average small business can expect an audit every 150 years, while the audit density for large and medium-sized companies is significantly higher. This disparity has been attributed to a shortage of skilled workers, complex and time-consuming audit cases, and auditors being assigned to other projects within their administrations.
Anne Brorhilker, a former public prosecutor and the managing director of the Initiative for Financial Turnaround, has criticised this trend, stating that strengthening the tax authorities is necessary to strengthen the rule of law and democracy. Brorhilker's organisation advocates for significant personnel and structural strengthening of the tax authorities.
The decreasing number of audits and the decrease in additional taxes collected have occurred despite the presence of significant gaps in public budgets. The amount of additional taxes collected through these audits has decreased from around 16 billion euros on average in the 2000s and 2010s to not even 11 billion euros last year.
This decline in tax audits and the decrease in additional taxes collected may impact the ability of the government to generate revenue and address budget gaps. For instance, Federal Finance Minister Lars Klingbeil needs more than 170 billion euros in his financial plan for the years 2027 to 2029.
On the other hand, the government is investing in digital tools to improve tax compliance. Mandatory electronic invoicing and updated digital VAT reporting are intended to improve tax compliance monitoring, which could mitigate revenue risks arising from fewer audits over time.
However, the potential revenue shortfall and budget pressure resulting from reduced audits could be a concern. As the number of audits continues to decline, it is crucial to ensure that enforcement efficiency is not compromised, and that the government can continue to generate the necessary revenue to address budget gaps.
Meanwhile, Austria is considering the abolition of the tax declaration for employees, but no further details have been provided in the article. This potential move could have significant implications for tax revenues and compliance in Austria.
In conclusion, while Germany places emphasis on digital tools to uphold tax compliance, this transition poses risks for short- and medium-term budget revenues for both federal and state governments if reduced audits mean less corporate tax enforcement. It is essential to strike a balance between digitalisation and traditional audit methods to ensure effective tax enforcement and revenue generation.
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- The decreasing number of tax audits and the subsequent decrease in additional taxes collected could potentially affect the employment policy of tax authorities, as they may need to address budget gaps and improve their financial situation to maintain effective enforcement and generate necessary revenue.
- In the context of business, politics, general-news, and finance, ongoing debates surround the impact of reduced tax audits on federal and state budgets, and the potential need for reevaluating employment and community policies within tax authorities to ensure they can continue to perform their duties effectively.
