Tax Evaders Come Clean in Germany

In 2014, Uli Hoeness, a celebrity soccer manager in Germany, was sentenced to three and a half years in prison for evading € 28.3 million in taxes.  The case was widely covered in the media at the time; this led to about 40,000 Germans with Swiss bank accounts taking advantage of the government’s amnesty program to voluntarily disclose previously undeclared assets in exchange for avoiding potential criminal prosecution.  Those taking advantage of the program must repay all evaded taxes and interest at the rate of 6% per annum.  In addition, as of 2015, if the amount of taxes evaded is € 25,000 or greater, an extra fine must be paid in the amounts of:

  •     10% of the evaded tax if the amount of evaded tax does not exceed € 100,000;
  •     15% of the evaded tax if the amount of evaded tax exceeds € 100,000 but not € 1,000,000;
  •     20% of the evaded tax if the amount of evaded tax exceeds € 1,000,000.

If the amount evaded exceeds € 50,000 per assessment year, the taxpayer must pay 5% of the understated tax to the public treasury, in addition to paying all taxes, interest and penalties, to secure a waiver from criminal prosecution.

The German tax authorities expected voluntary disclosures to taper off in 2015, as they tightened the amnesty program disclosure rules as of January 1, 2015, which included a requirement that voluntary disclosures provide accurate tax records for the past 10 years and even a single error could result in jail time.  However, despite these tightened tax amnesty disclosure rules, 15,120 taxpayers made voluntary disclosures in 2015.

A significant contributing factor to the continued high number of German tax amnesty disclosures is a shift in the Swiss banks policies.  Since 2014, the Swiss banks have required German account holders to provide the Swiss banks with proof that they have declared their foreign assets in Switzerland to German tax authorities; those who failed to provide the Swiss banks with sufficient proof would have their accounts closed.

In addition, due to the Foreign Account Tax Compliance Act agreements between 78 countries (of which Germany is a part of) to automatically exchange information, delinquent taxpayers are continuing to come out of the woodwork in Germany and entering in to the German tax amnesty program.