Shift in Audit Trend: Decrease in Tax Assessments within Corporate Entities
Decline in Tax Audits in German Companies: A Closer Look
The number of tax audits in German companies has seen a significant reduction over the past decade, with approximately 140,000 audits in 2024 – a decrease of nearly 60% compared to previous years. This decline is primarily due to resource constraints, digitalization, risk-based auditing approaches, and political decisions.
Key reasons for this trend include resource limitations within tax offices, leading to fewer auditors available for conducting tax audits. Additionally, tax authorities have shifted towards data-driven and risk-based methods, focusing audits on high-risk taxpayers. Greater use of electronic tax filings and improved automated data analysis allows tax authorities to identify risks without the need for full audits as often.
Political and policy decisions have also played a role in the decline of audits. There has been some debate about reducing administrative burden on businesses and tax authorities by lowering audit intensity. This policy environment may have led to a deliberate prioritization away from volume towards the quality of audits.
A recent survey conducted by the "Süddeutsche Zeitung" across 16 federal states in Germany found that the rate of audits for large companies was 17.8% in the previous year, with a total of 146,516 businesses audited. The survey also highlighted that auditors have been assisting with other projects, such as the reform of real estate tax.
Anne Brorhilker, a former public prosecutor and the manager of the initiative Finanzwende, has criticized the trend of decreasing audits. She suggested that the federal government should provide assistance if the states are unable to hire sufficient staff. Brorhilker emphasized the importance of strengthening the tax authorities for the rule of law and democracy.
The report also suggests that additional auditors generate a multiple of the revenue compared to the costs incurred by their hiring. This, coupled with the ongoing tax compliance needs, underscores the importance of maintaining an adequate number of auditors for effective tax administration.
As the decline in tax audits continues, it remains to be seen how this will impact tax compliance and revenue collection in the long term. Further research and analysis are needed to fully understand the implications of this trend and to develop strategies for addressing potential issues that may arise.
Businesses and finance are affected by the decline in tax audits in German companies, as the reduction in audits may impact tax compliance and revenue collection in the long term. With fewer audits, the tax authorities may have less oversight on businesses, potentially leading to potential tax evasion or errors.
