• 51 States Have Declared War on Tax Evasion - Voluntary Disclosure a Way Out
  • March 24, 2015 | Author: Michael Rainer
  • Law Firm: GRP Rainer LLP - Munich Office
  • Banking secrecy might soon be a thing of the past and tax evaders will come under more and more pressure. 51 states have signed a tax treaty in Berlin concerning the automatic exchange of information.

    GRP Rainer Lawyers and Tax Advisors in Cologne, Berlin, Bonn, Düsseldorf, Frankfurt, Hamburg, Munich, Stuttgart and London - www.grprainer.com/en conclude: Owing to the international tax treaty, it will become increasingly difficult going forward to withhold taxes from the exchequer and deposit illicit earnings in foreign bank accounts. 51 states have signed the tax treaty in Berlin concerning the automatic exchange of information. This likely means that banking secrecy will soon be history.

    Among the signatories were not only the 28 states of the European Union but also former tax havens such as Liechtenstein and Singapore. Switzerland and many other states also want to participate in the future or sign the treaty. For most states, the automatic exchange of information begins in 2017.

    The signing of the treaty could lead to the number of voluntary declarations increasing further, as a voluntary declaration presents tax evaders with the opportunity to return to a state of tax compliance. For this to happen, it must first be submitted on time, i.e. before the authorities begin corresponding investigations, which is likely to occur at an ever-increasing speed with the automatic exchange of information. Additionally, the voluntary declaration has to be complete. This means that all tax-relevant information from the past five years needs to be reported to the tax authorities. This will probably apply to no less than the preceding ten years as of 2015.

    Since even small mistakes can render the voluntary declaration ineffective, it ought not to be prepared alone or with the help of standard templates. Each case is different and must accordingly be individually appraised. A more advisable strategy is to consult lawyers and tax advisors who are experienced in the field of tax law and are able to draw up the voluntary declaration in such a way that it takes effect and there is no threat of a conviction for tax evasion.

    From January 1, 2015, substantially stricter rules are expected to apply to voluntary disclosure. Complete immunity will then only be possible if the amount of evaded taxes does not exceed 25,000 euros. This threshold has hitherto been set to 50,000 euros. In cases involving higher amounts, tiered penalty surcharges shall fall due according to the extent of the sum of evaded taxes.