Politics and administration should have taken on the new tax trick much earlier.
(Photo: dpa)
Cologne It’s that time again: a tax scandal outraged the republic. Numerous high-earning entrepreneurs have reduced their taxes with a clever model and saved many millions of euros. The damage is said to amount to half a billion euros. About 100 suspects have made themselves suspicious, including 50 very wealthy individuals.
Now tax investigators and prosecutors are investigating. That’s a good thing. The bad thing is that politics and administration did not address the issue earlier. There should be enough expertise in the Federal Ministry of Finance and in the 16 finance ministries of the federal states to prevent such “tax arrangements”, as their inventors call them, at an early stage.
Why, one wonders, is the state constantly losing out in the race with lawyers and tax advisors? Since 2013, the wealthy have used the now publicly known tax loophole under the Transformation Tax Act. It seemed to allow them to minimize taxes on high profits through artificially generated losses. Only now, in mid-2021, has the legislature put a stop to this practice.
Perhaps those involved broke the law, and they may even have committed a criminal offense. Or maybe not. The investigations by the public prosecutor’s offices in Munich and Frankfurt are still at the very beginning. Nobody can say today whether the state can repeat the lost money with a lot of effort, for example to build schools or kindergartens.
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Justice is hardly suitable as a repair shop for the legislature
The examples of other savings models show that the judiciary is often poorly suited as a repair shop for the legislature. In retrospect, it was not possible to overturn tax avoidance strategies such as media funds or the Goldfinger model. There, the financial and investigative authorities ultimately tried unsuccessfully to revise the supposedly unjustified tax advantages.
It remains the primary task of the legislature to ensure clear, unambiguous and fair tax rules. The obligation to advertise tax arrangements introduced in mid-2020 is not enough – especially since it only applies to cross-border models. It would be much more effective to clear out the law.
The complicated German tax law is an Eldorado for tax tricksters. The ground must be removed from them. If this does not succeed, politicians should not be surprised at a dwindling tax morale.
More: What role a Swiss private bank played in the tax ploy