The new amendments to Section 376 AO tighten the prosecution of tax crimes. These can also make it more difficult for self-disclosure to take place. In addition, it affects the alternatives for action in the accusation of tax evasion in the case of recurring tax types. This contradicts the constitutionally secured right of the tax evader not to have to burden himself. We explain which criminal tax problems occur and how they can be avoided.
On 01.01.2021, the extended limitation period of 15 years for the catalogue cases of tax evasion within the meaning of § 370 (3) AO came into force. However, this change has consequences that go beyond the criminal limitation period. For example, there is an extended correction period for self-disclosure pursuant to §§ 371, 398a AO. In addition, this legislative measure affects taxpayers' freedom from self-incrimination. By fulfilling their obligations to cooperate, they would indirectly burden themselves on their already committed tax offences from previous tax periods. This in turn has an impact on the alternatives for dealing with periodically recurring types of tax, such as income tax or business tax. We explain how you get out of this conflict situation.
The self-incriminating freedom (nemo tenetur se ipso accusare) is protected as an expression of the general right of personality by Article 1(1) in conjunction with Article 2(1) GG. The taxpayer therefore does not have to burden himself in criminal proceedings. This leads to an undue self-incrimination if the taxpayer is forced to indirectly charge himself for a tax offence from a previous tax period. This can happen with recurring tax types. We explain below you nevertheless avoid tax evasion in case of recurring tax types.
Problems related to tax evasion arise with periodically recurring tax types. The taxpayer may have already committed tax evasion in a previous assessment period. However, it remains undetected only if he continues his tax-unhonest and punishable behavior in the further assessment periods. If, on the other hand, he becomes tax-honest, the tax authority can draw conclusions about the already committed act of the previous assessment period.
Then the taxpayer burdens himself with regard to the earlier tax period by fulfilling his obligations to cooperate. If, on the other hand, his cooperation obligations were not fulfilled, he would continue to be punishable for tax evasion. If, for example, the taxpayer wishes to disclose a source of income that already existed in the previous year but is hidden for the first time, he comes into a corresponding conflict situation.
The Federal Court of Justice (BGH) solves some similar conflicts by suspending the criminal reinforcement of the tax return obligation under conditions. This applies if the taxpayer otherwise falls into an insoluble conflict situation. The prerequisite for indissolubility is the unreasonable conduct of the standard. However, the BGH only recognises this insofar as criminal proceedings were initiated with regard to the same injustice.
If, for example, the criminal tax proceedings have already been initiated because of fraudulent monthly advance payment of VAT from a certain calendar year, this identity is given in relation to the later criminally enforced VAT application for this same calendar year. The criminal obligation is also suspended if the criminal proceedings have already been initiated for attempted tax evasion with regard to the same type of tax and the same tax period.
Otherwise, the penal threat of § 370 AO, on the other hand, persists – despite the risk of self-incrimination with regard to earlier tax periods – if the taxpayer would commit a new wrong with an incorrect or omitted declaration. This concerns the periodic return obligations at issue here, in which the penalty threat would force the taxpayer to indirectly charge himself for a tax offence from one previous year.
In order to comply with the Nemo-tenetur principle in such conflict situations despite the continuing threat of punishment, the case-law adopts a ban on the use of evidence. However, this only applies if the tax evader can no longer refund an effective self-disclosure, for example because blocking reasons have already occurred pursuant to § 371 (2) AO.
If the possibility of an effective self-disclosure still exists for the original tax evasion, the BGH does not see the taxpayer in a conflict situation. Therefore, he should not stand a ban on the use of evidence. Rather, the taxpayer is supposed to free himself from the situation by revealing his deeds from an earlier tax period. The reason for this is the punitive effect of the self-declaration.
The information in the self-declaration must be provided in full and for all tax offences of a tax type not yet statute-barred. The above-mentioned extended limitation period refers to the catalogue cases of § 370 (3) AO. The tax evader can now only escape prosecution and the conflict situation described in the catalogue cases if he subsequently declares all taxes of a type of tax evaded in the last 15 years and, if necessary, repays them with interest.
Since the adjustment period dates back so far into the past, it is difficult for the taxable person to collect the necessary data in full and in the high quality required for self-disclosure. Regardless of this, the distinction between conditional intent and deliberate negligence – which is not punishable – is increasingly becoming an incalculable game of chance for the taxpayer, the longer the objective tax reduction has been. Therefore, particularly attentive documentation is required.
A self-disclosure that is not sufficiently precise is not only ineffective. In addition, it provides the law enforcement authorities with an initial suspicion and thus the reason for initiating criminal tax proceedings. We are happy to advise you on the submission of the optimal self-disclosure.
If the taxpayer in a conflict situation no longer has the option of self-disclosure in relation to previous tax periods, for example because of blocking reasons that have already occurred, the fulfilment of declaration obligations for later tax periods is only reasonable if the disclosed information can be used only in the taxation procedure. They may not be used for law enforcement purposes, insofar as they can directly or only indirectly lead to proof of tax evasion for the past tax years.
If it is still possible to submit a self-disclosure, you must submit it.
This article does not replace tax or legal advice in an individual case. Facts, current law, jurisdiction, documentation and implementation remain decisive.