Germany's government has announced a 26-point package to combat tax evasion and financial crime, proposing tougher criminal penalties, expanded investigative powers, artificial intelligence-driven fraud detection, and stricter compliance requirements for businesses.
Germany’s government has unveiled an ambitious 26-point package aimed at strengthening the country’s response to tax evasion, financial crime and illicit financial activity through tougher sanctions, enhanced enforcement powers and greater use of technology.
Harsher penalties for tax offences
Among the most significant proposals is an increase in the maximum prison sentence for organised tax crime from 10 years to 15 years. The government also plans to reclassify tax evasion as a felony rather than a misdemeanour, signalling a tougher approach to prosecuting serious tax offences.
The package would also abolish the current form of voluntary disclosure that allows certain tax offenders to avoid criminal prosecution by repaying evaded taxes together with a surcharge.
Greater enforcement powers and more investigators
To strengthen enforcement, the government intends to consolidate customs powers and recruit an additional 1,500 employees for the customs service, increasing the current workforce of around 49,000 officers.
Authorities would also receive stronger powers to identify and confiscate assets suspected of being linked to criminal activity. In addition, corporate fines for involvement in tax evasion would be increased.
The government plans to establish a joint data analysis centre with Germany’s federal states, using artificial intelligence to improve information sharing, detect fraud more effectively and coordinate investigations.
New compliance obligations for businesses
The proposals introduce several new obligations for businesses designed to improve tax transparency and preserve evidence.
Companies would be required to report value added tax more quickly through a new electronic reporting system. Accounting records would also need to be retained for 15 years instead of the current 10 years, giving prosecutors more time to secure evidence during investigations.
Businesses handling large volumes of cash would be subject to mandatory electronic cash-register requirements to reduce opportunities for underreporting revenue and tax liabilities.
Broader measures against financial crime
The package also includes stronger protections for whistleblowers, expanded systematic purchases of tax data by authorities and a review of measures to close loopholes commonly used in aggressive tax planning arrangements.
Collectively, the reforms represent one of Germany’s most comprehensive efforts in recent years to strengthen tax enforcement, improve detection capabilities and deter financial crime through tougher penalties, increased investigative resources and modern technology.
