30. May 22

Pandora Papers: Voluntary declaration for tax evasion can lead to exemption from punishment

Ever since the Pandora Papers were released back in 2021, the tax evaders exposed by the leak have been counting the days until their discovery by the authorities. In Germany, it remains possible to submit a voluntary declaration in order to avoid penalties.

The Pandora Papers represent the latest major tax haven leak since the Panama Papers were published in 2016. Almost 12 million documents were passed on anonymously to the International Consortium of Investigative Journalists (ICIJ). These contain confidential information from no less than 14 providers who have assisted their clients in setting up shell companies and the like. But the veil of anonymity over these dealings has now been lifted. More than 600 journalists from respected media outlets from across the world have sifted through the documents and will be reporting on them bit by bit. The Pandora Papers appear to include data from the 1970s all the way up to 2021.

It is already well known that numerous politicians and celebrities have been implicated in these explosive documents. What is less widely known, however, is that taxpayers who have participated in offshore dealings and have failed to report the taxable income to the German tax authorities are also likely to come under pressure to explain themselves. We at the commercial law firm MTR Rechtsanwälte note that in these cases it is worth examining whether a voluntary declaration could still lead to an exemption from punishment.

Involvement in offshore dealings or shell companies is not in and of itself punishable. Indeed, many of the transactions published in the Pandora Papers appear to be legal, as has been reported by the Süddeutsche Zeitung. It is when these dealings are used for money laundering purposes or when taxable income is registered in tax havens and not reported to the relevant tax offices that they become punishable.

Tax dodgers resident in Germany are also increasingly feeling the pressure since the release of the Pandora Papers. The first step they can take is to have someone review whether they have properly declared their taxes and, if necessary, can still submit a voluntary declaration for tax evasion in order to avoid penalties. It is essential that the declaration be submitted in a timely manner, i.e., before the tax evasion is discovered by the authorities, and that it be comprehensive. Additionally, it must not contain any errors if it is to be capable of leading to an exemption from punishment.

Experienced lawyers can be trusted to provide discrete support in preparing a legally compliant voluntary declaration.

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