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Tax evasion is not a trivial offence, but is consistently punished. Depending on the amount of tax evaded, tax evaders face fines or imprisonment. However, the legislator has left open a way to return to tax honesty – voluntary disclosure with exemption from punishment.
Heirs should also be careful, by the way. Time and again, untaxed black money is found in estates. Although the heir cannot be blamed for the tax evasion, they are still liable to prosecution if they do not inform the tax office immediately. In such cases, too, voluntary disclosure can help.
In the past, those who wanted to hide their untaxed income from the tax authorities would take their ‘suitcase of cash’ across the border and deposit the undeclared money in accounts in Switzerland or Austria, for example. Those days are over, and banking secrecy is largely a thing of the past. Many countries now participate in the automatic exchange of financial information (AEOI). This gives the German tax authorities access to millions of data records. Untaxed illicit money in foreign accounts can now hardly be hidden from the German tax authorities.
Although the risk of tax evasion being discovered has increased enormously in recent years, experts believe that significant sums of untaxed income are still being deposited in foreign accounts. For those affected, this undeclared money has long since become a sword of Damocles, as they must expect their tax evasion to be discovered sooner rather than later. They should therefore take action and submit a voluntary disclosure to avoid prosecution before it is too late.
A reason for exclusion exists, for example, if the tax evasion has already been discovered by the authorities and appropriate measures such as a tax audit or criminal proceedings have been initiated. It is therefore important to act in good time.
In addition, the voluntary disclosure must be complete. This means that all incorrect or incomplete information provided to the tax office over the past ten years must be corrected or supplemented. All tax-relevant data must be recorded so that the tax office can issue a new tax assessment.
Voluntary disclosures do not forgive mistakes. Even small errors can render them ineffective. In such cases, the voluntary disclosure can only serve to mitigate the penalty, similar to a confession.