Tax notices are issued as an administrative act. This does not mean, however, that this also entails an official clarification of the facts. The tax notice is now rather on the basis of the information of the taxpayer and other third parties. Taxes are therefore self-regulated and collected. This is permitted by the so-called risk management system. We explain how this works, why and on the basis of which legal basis self-disposition is possible.

Approximately one third of all tax revenue is based on so-called tax declarations. These are tax returns which have the effect of tax assessments subject to the review according to § 164 AO. This is called self-disposition.

In addition, according to § 155 Approach 4 AO, there is the possibility of exclusively fully automatic tax assessment. In combination with the electronic tax return obligation, this serves to determine the taxes fully automatically on the basis of the e-data transmitted by the party responsible for the declaration. Ultimately, this should minimise the administrative burden on the part of the authorities. This is based on the idea that, in principle, there is no reason for further investigation if the taxpayer cooperates sufficiently and there is no evidence that the facts he has declared are inaccurate or incomplete. Accordingly, according to the so-called cooperation maxim, the taxpayer enjoys a freedom-saving advance of trust. However, this can of course be shaken by erroneous explanations.

Self-disposition is generally permissible. The taxation procedure is a mass procedure in view of the annually recurring and unmanageable number of tax situations. Therefore, the financial administration is permanently in conflict between the careful clarification of the facts in individual cases and the securing of the overall enforcement. However, since the financial administration has only limited resources, the greatest possible realization of legality in individual cases does not bring about the greatest possible realization of equality in burden success. Such a procedure would rather overwhelm the financial administration. For this reason, the requirement of equal application of Article 3 I GG obliges individual enforcement to be oriented to the practical feasibility of overall enforcement.

Nevertheless, it is not permissible to base the taxation procedure solely on self-assessment, otherwise the requirement of legal and equal taxation cannot be secured. Therefore, there is the risk management system, which is legally provided for by § 88 V AO since 01.01.2017. However, it does not replace the actual audit, but serves to control the limited administrative resources according to the need for control of the cases. Therefore, the aim of the risk management system is to distinguish the tax cases in need of control from the low-risk tax cases. The auditing activities of the tax authorities must then be directed at tax cases in need of control.

Technical advice for

ongoing tax consulting?

3.2.1. Sampling

In the risk management system, the available electronic data, which the taxpayer himself has provided, are entered for plausibility checks. This includes, for example, tax returns, income surplus invoices or e-balance sheets. In addition, there is also data that third parties have transmitted, for example, the employer. Section 88 V 3 No. 1 AO requires a sample check of the self-assessment. This sample is of course unequal to the other taxpayers who were not selected. Nevertheless, it serves for general prevention and thus to ensure legality. Therefore, no one should be able to rely on a mere plausibility check. Therefore, the unequal treatment is objectively justified.

3.2.2. Control of self-assessment by public office holder

According to § 88 V 3 No. 2 AO, the financial authorities also have to ensure that the cases emitted by the risk management system are actually checked by an official. In addition, according to § 88 V No. 3 AO, public office holders can simply withdraw cases for a comprehensive examination on the basis of administrative experience. In this way, the taxpayer should assume that his case can also be examined independently of the fulfilment of certain parameters.

3.2.3. Plausibility check based on input parameters

The plausibility check of the self-assessment is carried out on the basis of the parameters entered in the risk management system. Section 88 V 4 AO prohibits the publication of the parameters set in the electronic risk management system if this jeopardises the tax revenue. Nevertheless, the tax authority must be able to explain the specific threat situation and must not categorically refuse information about the type of parameters set. It is therefore a conditioned reservation of secrecy. Only the depth range that would disclose the risk selection criteria and the current audit priorities may not be published in order to prevent the system from becoming predictable.