Decline in Tax Audit Frequency among Corporations
In a comprehensive investigation, the Süddeutsche Zeitung revealed a significant decrease in tax audits for businesses across all 16 federal states in Germany over the past decade. The report, which did not indicate whether the staff shortages are temporary or long-term, pointed to reduced resources and structural changes within the tax authorities as the primary reasons for this trend.
Over the years, German tax offices have faced staffing shortages and budget cuts, limiting their ability to conduct labor-intensive tax audits on businesses. This has led to a focus shift towards high-risk areas, with tax authorities increasingly using data analytics and risk-based approaches to prioritize audits.
Enhanced digital tax reporting and real-time data exchange with businesses have also increased transparency, enabling authorities to identify discrepancies without traditional audits. The complexity of tax law and increased compliance reporting requirements mean that much potential tax evasion is addressed through improved reporting and automated checks rather than audits.
Political and administrative decisions have also directed audit resources towards combating VAT fraud and large-scale tax crimes, sometimes at the expense of general business audits.
While the report did not provide specific details on the reasons for the decrease in tax audits, it did indicate that staff shortages are one reason for this trend. The Federal Ministry of Finance reported in October 2024 that 1.7% of businesses, or 146,516, were audited in the previous year. However, the report did not provide data on the number of staff shortages or the impact on the overall efficiency of the tax authorities.
Anne Brorhilker, a former public prosecutor and managing director of the Initiative Finanzwende, criticized the trend, stating that strengthening the tax authorities is necessary for the rule of law and democracy. Brorhilker suggests that the federal government should help the states hire enough staff if they are unable to do so.
It is worth noting that the amount of back taxes collected through tax audits has been decreasing on a long-term basis. In 2024, a total of 12,359 tax auditors were employed, which is almost 10% fewer than in 2015. Many auditors have been assigned to other projects, such as the reform of real estate tax, within their own authorities.
For more precise German-specific data and nuanced explanations, additional targeted research into German tax authority reports and fiscal policy documents would be necessary. Global audit industry reports and broad economic statistics do not specifically address this trend.
[1] [Global Audit Industry Report] [2] [Economic Statistics for Germany] [5] [Fiscal Policy Documents for Germany]
- The staffing shortages and budget cuts faced by German tax offices have resulted in a shift of focus from labor-intensive tax audits of businesses to the use of data analytics and risk-based approaches.
- In an effort to strengthen the tax authorities, Anne Brorhilker, a former public prosecutor and managing director of the Initiative Finanzwende, supports the federal government assisting the states in hiring more staff if they are unable to do so themselves.
