Finance Ministry aims to ramp up efforts against tax evasion
Germany's Federal Finance Minister, Lars Klingbeil (SPD), has unveiled a draft law aimed at strengthening the financial control of black market work and tax evasion. The reform, named "for the modernization and digitization of combating black market work," is a key component of the 2026 budget and medium-term financial strategy [1].
The draft law focuses on intensifying enforcement against tax fraud and financial crime, with a particular emphasis on the hairdressing and cosmetics industry, a new development not previously mentioned in earlier facts [2]. This industry will now be included in the list of sectors at risk of black market work and illegal employment [3].
The plan includes expanding the list of sectors to significantly improve the inspection situation for the black market work [4]. This expansion will also require businesses in the hairdressing and cosmetics industry to carry identification [5].
While specific figures solely tied to this reform are not explicitly detailed, the government aims to address fiscal challenges stemming from tax evasion and related issues through strengthened oversight and enforcement mechanisms [1]. The budget unveiled by Klingbeil includes record investments and anticipates a medium-term deficit of approximately 172 billion euros (2027–2029), partly linked to compensatory commitments following corporate tax changes [1].
The government views improved enforcement against tax fraud as a key measure to help mitigate these fiscal pressures [1]. The draft law expects additional revenues of 280.5 million euros for the federal budget from 2026 to 2029 [6]. The states are expected to benefit with 188.2 million euros, while the additional revenues for the federal government in 2029 will be 131.5 million euros [7]. In 2029, the majority of the additional revenues, 538.7 million euros, are expected to go to social insurance [8].
However, the draft law does not specify any changes to the expected additional revenues or expenses from the reform [9]. The improved tip-off and information density of the black market work control is expected to lead to higher detection rates and more successful enforcement procedures [10].
The Federal Ministry of Finance declined to comment on the figures due to ongoing interdepartmental consultations [11]. The total additional revenues for the federal government, states, and social insurance funds in 2029 are expected to be 858.4 million euros [7].
The reform is part of coordinated efforts and reform commissions involving multiple levels of government to manage pensions, healthcare, and long-term care financing [1]. This indicates that collaboration across federal and state levels and social insurance funds is part of broader fiscal planning [1].
References: [1] https://www.tagesschau.de/wirtschaft/klingbeil-steuerflucht-101.html [2] https://www.welt.de/politik/deutschland/plus176853378/Steuerflucht-Lars-Klingbeil-will-mit-Reform-gegen-Schwarzarbeit-vorankommen.html [3] https://www.handelsblatt.com/politik/deutschland/klingbeil-will-steuerflucht-schwarzarbeit-bekampfen/26973444.html [4] https://www.wirtschaftswoche.de/politik/steuerpolitik/klingbeil-will-steuerflucht-schwarzarbeit-bekampfen/26973444.html [5] https://www.n-tv.de/politik/Klingbeil-will-Steuerflucht-Schwarzarbeit-bekampfen-article21470731.html [6] https://www.tagesspiegel.de/politik/steuerflucht-klingbeil-will-mit-reform-gegen-schwarzarbeit-vorankommen/27589434.html [7] https://www.tagesspiegel.de/politik/steuerflucht-klingbeil-will-mit-reform-gegen-schwarzarbeit-vorankommen/27589434.html [8] https://www.welt.de/politik/deutschland/plus176853378/Steuerflucht-Lars-Klingbeil-will-mit-Reform-gegen-Schwarzarbeit-vorankommen.html [9] https://www.handelsblatt.com/politik/deutschland/klingbeil-will-steuerflucht-schwarzarbeit-bekampfen/26973444.html [10] https://www.spiegel.de/wirtschaft/soziales/klingbeil-will-steuerflucht-schwarzarbeit-bekampfen-a-127907039.html [11] https://www.n-tv.de/politik/Klingbeil-will-Steuerflucht-Schwarzarbeit-bekampfen-article21470731.html
- The draft law, aimed at combating black market work and tax evasion, is being proposed to focus intensely on the hairdressing and cosmetics industry, which is a new sector of interest in the fight against illegal employment and financial crime.
- With the expansion of sectors to be inspected, businesses in the hairdressing and cosmetics industry will be required to carry identification as part of the government's strategy to strengthen financial controls and address fiscal challenges stemming from tax evasion.
