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2019 spring report – reporting item No. 14 "Prepare central tax offices for future challenges"

Apr 02, 2020

Although the federal and state governments are well aware of structural shortcomings, they have failed to take action to enhance tax compliance enforcement of foreign traders. Thus, they tolerate huge tax losses.

Currently, 24 central tax offices are in charge of processing foreign trader turnover tax applications. In recent years, their workload has considerably increased because of new mandates and a soaring number of traders. A large number of central tax offices has reached their capacity limits and cannot even process foreign trader taxation following a work-to-rule policy. The tax offices are neither in a position to investigate tax fraud or evasion cases adequately, nor to make full use of tax compliance enforcement strategies. This poses a considerable risk to turnover tax revenue. We have highlighted the shortcomings in taxation and hold that structural enhancements are urgently needed. We recommended evaluating the system in place and refocusing structural organisation of the central tax offices by pooling more responsibilities. The Federal Ministry of Finance acknowledged the need for action but owing to the reluctant attitude of the federal states has chosen not to develop an overarching framework. The Ministry should take prompt action to urge the federal states to embark on a reform process.

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