Attorney at law on suspicion of tax evasion in court

In January 2018, the Göttinger Tageblatt reported on a criminal case against a lawyer. The lawyer is suspected of having evaded taxes. He is said to have declared private expenses for a finca on Mallorca and his wife’s Porsche as business expenses.

tax evasion private expenses

1. Lawyers and Taxes

As a rule, a lawyer works as a freelancer and submits his tax returns as part of a surplus income statement. Operating expenses, such as travel expenses to court hearings or specialist literature, can be deducted as business expenses.

The accused attorney had a private Finca on Mallorca. He set the costs arising for it in the context of his tax return as operational expenditures. In addition, a Porsche that the wife used privately was declared as the lawyer’s vehicle used for business purposes.

The piquant thing about this case is that the tax auditors had already noticed a few years earlier how “generously” the lawyer obviously declared private expenses as operating expenses. Despite the previous warning, he continued his conduct. At this point, at the latest, it is likely that the lawyer had intention with regard to a possible tax evasion.

The public prosecutor’s office had initially offered to conclude the proceedings with a penalty order. The person concerned appealed against this. Among other things, it is disputed in the proceedings whether the lawyer was incorrectly advised by a tax consultant. In addition it concerns the question whether a punishment-exempt fiscal self-denunciation would have been possible.

2. Intentional tax evasion and voluntary tax declaration exempting from punishment

According to the case law of the supreme German court in criminal tax matters (Federal Court of Justice), a punishable tax evasion already exists if it is not made clear in a tax return to the tax office which tax-reducing facts were taken as a basis for the tax return. This applies even if one is subjectively of the opinion that certain expenses are deductible, but this is objectively disputed.

In legal borderline cases, a citizen is obliged to communicate the facts so clearly and unambiguously in an accompanying letter that the tax office is put in a position to form its own opinion.  The obstacles to accepting intent to tax evasion are very low in criminal tax law. In case of doubt, everyone is responsible for their own tax returns.

In order to file a voluntary declaration that exempts the taxpayer from liability for punishment, it is necessary for the taxpayer to correct all past declarations comprehensively and completely. If this only takes place after the tax investigator or the public prosecutor’s office is already aware of the facts, it is usually too late for a self-indictment that exempts the taxpayer from punishment.