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Tackling undeclared work: Improve data sharing across customs and tax authorities

Oct 13, 2020

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In tackling undeclared work, federal government and regional customs and tax authorities do not closely work together. They consider their respective data sovereignty a first priority. As a result, rather than fully sharing all and any information, some authorities even withhold data as they deem fit. When publishing the advisory report, Kay Scheller, the President of the German SAI said: "Current collaboration of the Federal Ministry of Finance and the customs and tax authorities impedes statutory data sharing and prevents tackling undeclared work. The tax authorities tolerate annual taxation losses caused by undeclared work and illegal work that amount to hundreds of millions of euros”. The German SAI has studied how the customs and tax authorities work together in tackling undeclared work and advised parliament on the matter. We found that sharing of intelligence and data across government levels has major legal and technological shortcomings. There is even a lack of technological infrastructure to allow data sharing to take place effectively as required by legislation. The customs and tax authorities concerned do not have a common platform to access and share relevant information safely and appropriately. As a result, data is stored externally and handed over personally or printed in hard copy to be converted to digital format by the recipient. As a result of this cumbersome procedure, it cannot be ruled out that in many cases, authorities just do without relevant data from others.

For the year 2019, the customs authorities identified a taxation loss of €750 million due to undeclared work. The actual loss is likely to be much higher.

We consider it crucial to ensure strong cooperation between customs and tax authorities and put it on a sustainable footing. "Time is overdue for the Federal Ministry of Finance to act and set up a joint database for tackling undeclared work and to enforce its use”, Mr. Scheller added. We recommend to the Ministry promptly removing the obstacles that prevent collaboration. In particular, the Ministry should put into place a state-of-the-art environment to ensure safe and secure data matching. The Ministry acknowledged most of our findings and has taken some steps in the right direction. However, implementation of these steps is still pending. Urgent action is needed to address these challenges.

(Press release of 13 October 2020)

 

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