Taxpayers are obliged to file their annual returns which the state needs to fund its expenses for society. By doing so, sensitive and personal information are disclosed to the respective tax administration. Inevitably, the issue of disclosing relevant information arises as well as the question of how to treat the information without harming the basic rights of an individual taxpayer. This thesis contributes to the issue of disclosing tax related information by focusing on tax confidentiality, its development and status, the current legal framework, and the rationale behind the approaches of tax confidentiality, undertaken by different legal systems. More specific, this thesis incorporates a comparison between the jurisdictions of Germany and the United States, examining their national legislative rules on tax confidentiality. By elaborating upon the similarities, differences, and the rationale of tax confidentiality in both systems, the thesis will uncover the fact, that both, Germany and the U.S. have a high level of confidentiality. There exist, however, interesting differences related to the level of confidentiality, and this thesis will conclude that the German system has a higher level of confidentiality, for instance in relation to the exceptions to tax confidentiality.
Table of Contents
Introduction
I Germany
Historical Development of Tax Confidentiality
Legal Framework of Tax Confidentiality
§ 30 (1) and § 30 (3) AO – The Scope of Tax Confidentiality
§ 30 (2) AO – Breach of Duty
§ 30 (4) AO – Exceptions to Tax Confidentiality
§ 30 (5) AO – Disclosure in case of Intentional False Statements
§ 40 AO – Actions contrary to the Law
Consequences of a Violation of § 30
II United States of America
Historical development of Tax confidentiality
Legal Framework of Tax Confidentiality
Freedom of Information Act and Internal Revenue Code
§ 6103 (a) and § 6103 (b) IRC - Definitions
§ 6103 (c) IRC – Disclosure of Returns and Return information to designee of Taxpayer
§ 6103 (h) (4) IRC – Disclosure in juridical and administrative proceedings
§ 6103 (m) – Disclosure of Taxpayer Identity Information
§ 6110 IRS – Public Inspection of Written Documents
III Comparison
Historical Development of Tax Confidentiality
Confidentiality as a right – Status in Constitution
Legal Framework of Tax Confidentiality
Possible Exceptions to Tax Confidentiality
Violation of Tax Confidentiality
IV Rationale
Conclusion
Research Objectives and Key Topics
This thesis examines the protection of sensitive tax-related information within the legal systems of Germany and the United States, investigating how these jurisdictions balance state interests in tax administration with the individual taxpayer's right to privacy and confidentiality.
- Comparative analysis of the historical evolution of tax confidentiality in Germany and the U.S.
- Examination of the legal frameworks, specifically the German Fiscal Code (AO) and the U.S. Internal Revenue Code (IRC).
- Identification and assessment of exceptions to tax confidentiality in both legal systems.
- Investigation into the underlying rationales—ranging from taxpayer protection to public interest and tax compliance strategies.
Excerpt from the Book
Historical Development of Tax Confidentiality
Under German law, the term tax confidentiality, namely ‘Steuergeheimnis’, was established in 1933. Its fundamental aspects, per se, were codified already 160 years ago. Dating back to 1851, the Prussian Income Tax Code was established, implying the provision on tax confidentiality in Section 32 of the Act. Moreover, tax confidentiality was already protected by criminal law, which entails that a violation of confidentiality would result in juridical, criminal proceedings. In the years preceding World War I, the legislative instruments that were enacted, followed the approach on tax confidentiality taken by the Prussian Law. Tax confidentiality was implemented, inter alia, in the Income Tax Act of 1906 and in the ‘Reichsgabenabordnung’ of 1919, which remained applicable for 60 years. In this Act, tax confidentiality was stipulated in § 10. The court established in the ‘Popitz Erlass’ of 09.11.1923, how tax confidentiality was applied.
Under the regime of the national socialists, from 1933 till 1945, the importance of the protection of tax confidentiality was emphasized. Notwithstanding, the practical approach of tax confidentiality did not appear to be the same as the theoretical approach. Lists of taxpayers, who filed their return late, were published. Besides that, tax confidentiality was often abused within situations in which the state acted according to its own interests. After 1945 and with the end of World War II, one of the goals of the new government was to re-create tax confidentiality and to ensure that the abuse of tax confidentiality would not occur again. The legislator codified exceptions that officially stated the circumstances allowing for a disclosure. As a result of this arrangement, the legislator expressed that in order to disclose information and in order to justify a breach of tax confidentiality, a legal decree was required. The enactment, thereafter, namely the codification of the Fiscal Code of Germany of 1977, contained tax confidentiality in § 30. Even though, several amendments have been made since 1977, the Code remains, until today, the applicable law in relation to tax confidentiality.
Summary of Chapters
Introduction: Outlines the core concepts of tax information, transparency, and confidentiality, and defines the research objective to compare the legal approaches in Germany and the U.S.
I Germany: Provides a comprehensive overview of the historical development and the specific legal provisions in the German Fiscal Code (AO) regarding tax confidentiality.
II United States of America: Details the historical evolution of U.S. tax confidentiality and examines relevant legislation including the Freedom of Information Act and the Internal Revenue Code.
III Comparison: Contrasts the two jurisdictions, highlighting differences in historical consistency, constitutional status, and the number of exceptions to confidentiality.
IV Rationale: Explores the motivations behind the legislative approaches, identifying taxpayer protection in Germany and tax compliance as the primary drivers in the United States.
Conclusion: Summarizes the finding that both countries maintain a high level of confidentiality, though Germany's system is characterized by a more static and protective approach.
Keywords
Tax confidentiality, tax compliance, tax transparency, rationale, taxpayer privacy, Fiscal Code, Internal Revenue Code, comparative law, tax information, legal system, data protection, public interest, tax evasion, secrecy.
Frequently Asked Questions
What is the core subject of this thesis?
The work focuses on the legal protection of tax-related information and the concept of tax confidentiality, comparing how Germany and the United States handle taxpayer data.
What are the primary themes analyzed in the research?
Central themes include the historical development of confidentiality, the current legislative frameworks, specific exceptions to confidentiality, and the underlying rationales for protecting tax information.
What is the central research question?
The study seeks to answer: "How is tax-related information of an individual taxpayer protected by confidentiality, and what is the rationale behind it?"
Which scientific methodology is employed?
The author employs a comparative legal analysis, examining national legislative rules, case law, and historical developments to identify similarities and differences between the German and U.S. jurisdictions.
What topics are covered in the main section?
The main section covers the detailed legal provisions of the German Fiscal Code (AO) and the U.S. Internal Revenue Code (IRC), discusses specific exceptions to secrecy, and compares the legal status and constitutional framework of both countries.
Which keywords best characterize this work?
Key terms include tax confidentiality, tax compliance, taxpayer privacy, comparative law, and specific legal instruments like the German AO and U.S. IRC.
Does the German system allow for the disclosure of taxpayer identity to the media?
No, unlike the U.S. system, where the IRS may disclose information if a taxpayer cannot be located, Germany does not have such an exception in its Fiscal Code.
How does the U.S. define "return information" in this context?
The definition is anchored in § 6103 (b) (2) of the IRC, covering almost all information referred to the IRS by the taxpayer regarding their tax liability.
What is the impact of § 40 AO in the German system?
§ 40 AO stipulates that it is immaterial for taxation whether an action violates statutory regulations, ensuring that even income from illegal sources is taxed and remains subject to confidentiality.
Why did the U.S. introduce the "Pink Slip Requirement" in 1934?
It was introduced in response to the 1929 stock market crash and subsequent financial crisis as a limited disclosure measure to prevent tax evasion and identify loopholes, though it was later repealed.
- Quote paper
- Nadja Büngers (Author), 2017, Taxpayers Rights in Comparative Perspective. The Protection of Tax Related Information of Individual Taxpayers and the Rationale Behind It. A comparison between the legal systems of Germany and the United States, Munich, GRIN Verlag, https://www.grin.com/document/379630
