Checklist: How Companies Can Implement an Anonymous Whistleblower System

When it comes to undisclosed income from renting out vacation rentals booked online, tax authorities have done their homework. In September 2020, the internet giant Airbnb, headquartered in Ireland, was ordered by a court to hand over its user data. A special unit of the Hamburg tax authorities, together with other federal and state agencies, secured this ruling in a protracted international legal proceeding. Other online platforms such as Wunderflats, Wimdu, 9flats, HouseTrip, Fewo-Direkt, Gloveler, Devepo, etc., are expected to receive similar requests soon. Similar to the tax evader CDs from bank customers in Switzerland, Liechtenstein, Luxembourg, etc., which contained information on secret foreign capital accounts, this will now also uncover undisclosed income from the rental of vacation homes.

To avoid prosecution for tax evasion, time is of the essence. Filing a voluntary disclosure to avoid penalties is still possible until the Airbnb data has been analyzed, the tax investigation unit has launched its probe, and a letter from the tax office arrives in the mail. That sounds simple, but it isn’t. The legal framework is complicated. The legal requirements for the validity of such a voluntary disclosure have been significantly tightened in recent years. Based on the disclosed information and the complete set of figures correctly allocated to each year, the tax office must be able to issue a tax assessment immediately. Only in this way can the tax evader avoid punishment.

The tax office itself does not provide any instructions in the form of an official form for correcting an incomplete, incorrect, or even entirely omitted tax return. This is because in many cases, this would not result in the desired exemption from punishment, but rather the opposite—prosecution for tax evasion. For this reason, the German tax authorities have left it at that, allowing voluntary self-disclosure to be submitted without any specific form.

With digital voluntary disclosure, we—as criminal tax law specialists at the law firm Olfen Meinecke Völger—can help those affected achieve their goal quickly and with legal certainty:

exemption from criminal liability. It is particularly important to us that our clients’ highly sensitive information is collected under the highest security standards and, as criminal defense attorneys, is safe from seizure by law enforcement agencies. Akarion’s software provides us with the necessary blockchain-based, tamper-proof documentation for this purpose. Incidentally, this location-independent option for using our platform enables straightforward, contact-free collaboration in the era of COVID-19.

Thanks to the simple menu navigation, the program is easy to use even for legal laypeople without in-depth computer knowledge. Our clients first create a report with a single mouse click. They are then guided step by step through a questionnaire designed for rental income to provide as complete a picture as possible of the income generated from the rental and other relevant details. This is important. Even minor deviations of more than five percent from the actual tax bases can render the declaration invalid. However, our questionnaire is not always sufficient. Every case is different, and the devil is in the details. This is especially true if additional income from other sources has been concealed or if a voluntary disclosure has already been filed in the past. That is why, when necessary, we also advise our clients in writing via a specially secured communication channel or, upon request, through telephone or video conferences.

We are pleased to offer this new, accessible service to our clients. After all, too many affected individuals have so far shied away from filing a voluntary disclosure out of fear of complicated, time-consuming, and costly procedures. But doing nothing, burying one’s head in the sand, and waiting until law enforcement agencies get serious and exhaust the full range of criminal procedural options is the worst solution.

For we know from our daily legal practice that hardly any other offense is now prosecuted with such relentless severity as tax evasion. Criminal tax law today means: searches of business premises, workplaces, and private residences; digital tax audits conducted across national borders; European-coordinated investigative measures; immediate seizure of assets and account attachments to secure the later forfeiture of proceeds from the crime; high monetary penalties for case dismissal; suspended sentences with entry in the Federal Central Register, and high-profile court proceedings. This list could easily be extended. Against this backdrop, it is clear how important it is to secure immunity from prosecution. Only those clients who take proactive steps and utilize the tax amnesty program to restore tax compliance are spared this fate.

During the flood of voluntary disclosures by individuals fleeing capital to Switzerland, our advisors processed some of these amended tax returns almost like an assembly line. None of them were invalidated. In addition to the necessary tax and criminal law expertise and extensive experience in handling voluntary disclosures on our part, what is needed above all is the client’s willingness to take this step without compromise. Tactics are strongly discouraged. Continuing to withhold information in order to save at least some taxes is the wrong approach and is punished particularly harshly if discovered.

In contrast, based on our experience, the tax authorities generally handle the subsequent, complete disclosure of taxable income professionally and fairly. We must also ensure this. That is why even experienced tax advisors repeatedly turn to us due to the unforeseeable criminal consequences of an invalid voluntary disclosure.