Germany unveils 26-point plan to crack down on tax evasion, raising penalties and adding 1,500 customs jobs

The 26-point plan

On Thursday, Finance Minister Lars Klingbeil and Justice Minister Stefanie Hubig presented a 26-measure action plan against tax and financial crime in Berlin. The package aims to raise billions in additional revenue by increasing investigative pressure, detection risk, and penalties. "Honest people must not be taken for fools," Klingbeil said, adding that the state would step up the fight against tax fraud.

Honest people must not be taken for fools. That is why we are increasing investigative pressure...in the fight against tax fraud.

The plan would abolish the current form of voluntary disclosure that allows tax offenders to avoid prosecution by repaying evaded taxes plus a surcharge. It also reclassifies serious tax evasion as a felony rather than a misdemeanour, introduces a minimum one-year prison sentence, and raises the maximum term for organised tax crime from 10 to 15 years.

Tougher penalties and asset seizure

The self-disclosure rule, long a controversial feature of German tax law, would no longer grant immunity. "Criminals should no longer be able to buy their way out so easily," Klingbeil said. The justice minister stressed that prosecutors would be obliged to pursue cases and could not drop them at their discretion.

Tax crime harms us all. It undermines trust in the fairness of our constitutional state. It must be clear: tax crime must not pay!

Authorities would gain stronger powers to seize assets of suspicious origin. Customs officers could confiscate items such as luxury cars and watches for 180 days, after which the owner would have to prove they were acquired legally. "The Porsche and the Rolex are then first gone, and that will really hurt perpetrators," Klingbeil said. Fines for companies involved in tax evasion would also increase, and a public register would list businesses sanctioned for serious tax offences.

Digital enforcement and AI

A new Joint Centre against Tax and Financial Crime, modelled on Germany's counter-terrorism centre, would be set up at the customs service. It would add 1,500 jobs to the current workforce of about 49,000 and house a data analysis centre using artificial intelligence to untangle complex corporate structures and identify straw men. The government also plans to introduce an electronic system for near-real-time VAT reporting, extend the retention period for accounting records from 10 to 15 years, and make electronic cash registers mandatory from 1 January 2028 for businesses with annual turnover above €100,000. Digital receipts would replace the existing paper receipt requirement.

Closing loopholes and crypto

The plan targets gaps in the taxation of cryptocurrency gains. Currently, profits from crypto sales are tax-free after a holding period of one year. Klingbeil called this a "justice gap" and said it would be closed, bringing crypto in line with the taxation of labour income and stock gains. Whistleblower protections would be strengthened, and the federal government would join the Länder in systematically purchasing tax data to uncover hidden assets.

Revenue hopes and budget pressure

Klingbeil has pencilled in €1 billion in additional revenue from fighting tax fraud for the 2027 budget, which foresees total spending of €555.4 billion and around €200 billion in new borrowing. The finance ministry declined to give a precise estimate of the plan's yield, but officials expect it to run into billions. The German Tax Union estimates that €100 billion or more is lost to tax evasion each year, with VAT fraud alone accounting for roughly €25 billion and cash-intensive sectors such as hospitality and nail salons for another €10–15 billion.

Political pushback

The plan drew immediate criticism from Bavaria, which warned that the proposed public register of sanctioned companies amounted to a "public pillory" and could cause incalculable reputational damage. The opposition CDU/CSU reacted cautiously to the abolition of self-disclosure immunity, noting that the mechanism had historically served to bring offenders back into compliance. First legislative changes are expected as early as August, according to the finance ministry.