Federal Court of Justice, 07.02.2012, Ref.: 1 StR 525/11
Taxpayers in Germany form a community of solidarity. In order to ensure a fair and equal distribution of the tax burden in Germany, it is necessary for all taxpayers in Germany to be taxed according to their ability to pay (ability-to-pay principle).
The protection of the timely and complete collection of the taxes to be levied, but also the protection of the assets of the honest tax debtor, is guaranteed in Germany by criminal tax law and the law on tax offences.
After all, tax offences always result in damage to the assets of honest taxpayers.
Criminal tax law and the law on tax offences are regulated in Part 8 of the German Fiscal Code (AO). Part 8 of the AO in turn consists of four sections:
1. substantive criminal provisions (Sections 369 to 376 AO)
2. substantive provisions on fines (Sections 377 to 384 AO)
3. criminal proceedings (§§ 385 to 408 AO)
4. fine proceedings (§§ 409 to 412 AO).
All tax offences can therefore be divided into criminal tax offences (Section 369 I AO) and administrative tax offences (Section 377 I AO).
Tax offences are among others:
- Tax evasion (§ 370 AO)
- Commercial or gang-related damage to VAT revenue (Section 26c UStG)
- Tax evasion
- Breach of ban (§§ 369 I No. 2, 372 AO)
- Falsification of tax stamps (§ 369 I No. 3 AO in conjunction with §§ 148 ff. StGB)
- Favouring a tax offender (§ 369 I No. 4 AO in conjunction with § 257 StGB)
Fiscal offences are among others:
- Reckless tax evasion (§ 378 AO)
- Tax hazards (§§ 379 - 383 AO)
- Unauthorised acquisition of tax refund and compensation claims (Section 383 AO)
- Damage to VAT revenue (§ 26b UStG)
Sentencing in criminal tax law is based on the guilt of the offender.
This is therefore an individual process that must be examined on a case-by-case basis. All circumstances that speak in favour of and against the offender are weighed against each other.
The law specifies certain circumstances that must be taken into account when weighing up the circumstances (Section 46 (2) StGB):
- the motives and goals of the perpetrator,
- the attitude that speaks from the deed and the will expended in the deed,
- the extent of the breach of duty,
- the manner of execution and the culpable consequences of the offence,
- the offender's background, personal and financial circumstances and
- behaviour after the offence, in particular the offender's efforts to make amends for the damage and the offender's efforts to reach a settlement with the injured party.
In the above-mentioned ruling by the Federal Court of Justice on 7 February 2012, it confirmed its principles according to which a suspended sentence for tax evasion amounting to millions can only be considered if there are particularly weighty reasons for mitigation.
Case Background
In 2001, the defendant was a co-partner and managing director of P. GmbH. He sold P. GmbH and another company to T. AG for DM 80 million. In addition, he received shares worth DM 7.2 million in return for facilitating the purchase of the other company shares. The defendant falsely declared these shares as part of the purchase price in his income tax return. This allowed him to take advantage of the favourable tax treatment under the half-income method, which resulted in a tax evasion of more than 890,000 euros for 2002.
Further tax evasion through false declaration of royalties
After the sale, the defendant remained active as managing director of P. GmbH. In 2006, he was entitled to royalties totalling more than 570,000 euros. In order to evade the income tax due, he arranged for the royalties to be allegedly gifted to his wife and children. He created false documents to conceal this "gift". This led to a tax evasion totalling 240,000 euros.
Conviction by the Augsburg Regional Court
On 8 April 2011, the Augsburg Regional Court sentenced the defendant to a total prison sentence of two years, suspended on probation, for tax evasion in two cases. In both cases, the court recognised a particularly serious case of tax evasion in accordance with Section 370 (1), (3) sentence 2 no. 1 AO. Despite this finding, a suspended sentence was imposed, which was attributed to mitigating circumstances.
2. Decision of the Federal Court of Justice (BGH)
The Federal Court of Justice (BGH) overturned the judgement of the regional court in the sentencing decision. The public prosecutor's appeal sought a higher sentence. The Federal Court of Justice saw considerable errors of law in the sentencing of the district court, which had worked in favour of the defendant. In particular, the lack of aggravating circumstances was taken into account as a mitigating factor and significant aggravating factors, such as the defendant's collaboration with his tax advisor to prepare manipulated documents, were not sufficiently taken into account.
In addition, the regional court had orientated itself too strongly towards the possibility of a suspended sentence when determining the sentence. The BGH clarified that in the case of tax evasion totalling millions, a suspended sentence can only be considered if there are particularly weighty grounds for mitigation. However, the regional court had not sufficiently justified these, which is why the case was referred back to another criminal division of the regional court for a new hearing and decision.
Source: Federal Court of Justice
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