Tax evasion de luxe?

Incomplete voluntary disclosure and the consequences

The topic of self-disclosure for tax evasion has been brought to our attention on all media channels in the recent past. Whatever one’s opinion of the Uli Hoeneß case and the verdict, the case is closed.

What remains, however, is the question of how it can happen that a tax evader, who certainly has very good advisors, could hand over an obviously completely incomplete voluntary declaration to the authorities. We ask our regular guest author Dr. Johannes Fiala, among other things a specialist lawyer for tax law, whether the legal and tax advisors are at least not partly to blame for the unsuccessful voluntary declaration. Or put another way, when are tax advisors liable?

Tax advisors are not liable instead of, but sometimes alongside the client

The tax advisor is criminally liable if he is an accessory or an accomplice to the offence. Complicity exists, for example, if client and advisor decide together to disclose the facts only incompletely, in the hope that this will not be discovered by the tax authorities. Co-perpetration does not, of course, mean that the same punishment is shared between the two, according to the motto “a problem shared is a problem halved”. Rather, complicity may actually increase the penalty.

The submission of a voluntary disclosure by the taxpayer on the basis of incomplete information to the tax advisor can be judged as a conditionally intentional act, which, however, according to the case law (BGH, judgement of 17.03.1995, file no. 2 StR 84/95) does not yet lead to a criminal aiding and abetting of the advisor. If the tax advisor merely prepares the tax return or voluntary declaration, but does not sign it and does not submit it, not even a reckless tax evasion by the advisor will come into question (OLG Zweibrücken of 23. 10.2008, file no. 1 Ss 140/08).

Time and again, it happens that voluntary declarations remain incomplete and are therefore ineffective as a whole (LG München II, judgement of 13.03.2014). Foreign banks may be too slow in providing the necessary supporting documents or there may be no online access to retrieve data via the Internet. Then, however, the taxpayer and his advisors still have it in their hands to estimate the tax evaded each year at a sufficiently high level, and ideally to make a correspondingly high subsequent advance payment at the same time. If the tax office only receives heaps of documents and no comprehensible calculation or (at best too high) estimate as a basis, then the tax office cannot immediately issue new notices. The tax office must then step for its part to the estimate, § 162 AO. With it the self announcement is however stepped and/or incompletely effected, and thus altogether ineffective!

There are, however, taxpayers who speculate, even in the context of a voluntary disclosure, that the tax office will not discover an underestimation or other incompleteness. After a precautionary overestimation of tax liabilities, precise calculations must be made on the basis of the documents, i.e. a new tax return must be submitted for each calendar year, as it were. This can also be done in the objection procedure in order to then reduce the tax to the concretely calculated amount actually owed.

Sending masses of supporting documents without systematically compiling and evaluating the facts is not proper full disclosure, as required, and is worth no more than a self-disclosure filed in the form of a bag of punched-out individual letters, for assiduous self-assembly.

Such tax advisors are exempt from punishment who subjectively merely believe or suspect that their professional activity is being misused for tortious purposes, because this is still socially adequate, typical of the profession, commonplace and thus “neutral”.

The case is different when the client’s intent to abuse is positively known. Tax advisors who withhold supporting documents from the tax authorities, for example, in order to make a legally erroneous tax calculation by the advisor unrecognizable on the state side, risk at least their own punishment also because the facts were not fully disclosed. The maxim is: disclose the facts completely, and discuss the legal consequences later in the assessment and appeal proceedings “with an open mind”. Anything else would be a deception of the authorities, and a merely partial and therefore ineffective self-disclosure (BGH, decision of 20.05.2010, file no. 1 StR 577/09). Since 03.05.2011 at the latest, incomplete voluntary declarations have been ineffective as a whole. Particularly active in advancing the case law of the BGH has so far been the StA at the LG Munich II, responsible among other things for tax evaders “in the valley” (as locals call the area around Lake Tegernsee), § 371 of the German Tax Code (AO).

Liability for pecuniary loss, in particular for penalties

The tax advisor is liable to his client if, for example, a fine is imposed on the client due to carelessness (BGH, judgement of 14.11.1996, ref. IX ZR 215/95; BGH, judgement of 15.04.2010, ref. IX ZR 189/09). Compensable damages would also include compensation for deprivation of liberty, the necessary bail and any resulting loss of property and income, any fines, and for the costs of criminal defence.

Such damages are regularly insured in the StB’s and RA’s pecuniary damage liability. Insurance cover is excluded if the professional acts (conditionally) intentionally or if his conviction for a tax offence also occurs in connection with this. If it is a case of a particularly gross “knowing” professional error, since 19.07.2013 only the partnership company with limited professional liability and the Rechtsanwaltsgesellschaft mbH are legally minimum insured for this within the scope of their coverage. It is up to the tax evader to ensure that the liability coverage of its advisors is adequate.

by Dr. Johannes Fiala

by courtesy of (issued April 2014)

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About the author

Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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