Germany: New Action Plan to Fight Tax and Financial Crime

Germany has presented a new action plan aimed at strengthening the fight against tax evasion, VAT fraud, money laundering and other forms of financial crime.

The plan was announced by the Federal Ministry of Finance together with the Federal Ministry of Justice and Consumer Protection. It includes a wide range of measures intended to improve cooperation between authorities, expand data analysis and increase the risk of criminals being detected.

One of the main proposals is the creation of a Joint Centre against Tax and Financial Crime. The centre would bring together tax investigators from Germany’s federal states and customs financial investigators.

By working in the same structure, the authorities should be able to exchange information more quickly, coordinate investigations and combine their expertise in complex financial crime cases.

Germany also plans to establish a Tax Authority Data Analysis Centre. The centre would grant federal and state authorities access to tax information collected by various public bodies.

Relevant data would be brought together on a central platform, helping investigators identify connections between taxpayers, transactions and possible fraud schemes.

Artificial intelligence tools would also be developed to detect suspicious patterns in financial and tax data.

A new VAT reporting system is planned to help authorities detect fraudulent VAT refund claims and missing trader fraud.

Missing trader fraud usually involves businesses collecting VAT from customers and then disappearing without paying the tax to the authorities.

Better, faster access to transaction data should enable the identification of suspicious activities at an earlier stage.

The action plan also proposes mandatory electronic cash registers for businesses operating in cash-intensive sectors. The measure is intended to reduce undeclared sales and tax evasion involving cash payments.

The retention period for accounting records could also be extended to 15 years. In addition, businesses may be required to store copies of tax-related data on mirror servers located in Germany.

Germany intends to introduce stricter penalties for organised and particularly serious tax evasion.

Under the proposals, prison sentences for severe organised tax crime could be increased to up to 15 years. Certain serious tax offences could also be classified as felonies, carrying a minimum prison sentence of one year.

Tax audits would increasingly follow a risk-based approach.

Instead of examining all businesses in the same way, the authorities would use improved data analysis to identify taxpayers and transactions showing higher risk indicators. This should allow investigators to focus their resources on cases where tax fraud is more likely.

The action plan forms part of Germany’s broader effort to improve tax fairness, combat illegal economic activity and strengthen financial enforcement.