This applies in particular to the use of standardized interfaces for transmitting data between businesses and the tax authorities. Following the model used for payroll tax, such interfaces could also be introduced for income tax and corporate income tax. Standardized interfaces offer advantages for all parties involved: They make it easier for businesses to provide tax-relevant data and enable auditors to begin analyzing the data more efficiently.

The legislature has already established the necessary legal framework. This framework must now be brought to life through practical requirements for digital interfaces. Close coordination with businesses is essential. For example, software providers must be given opportunities to test the interfaces. Businesses must also be given sufficiently long implementation periods to adapt their IT systems. Standardized data exchange must also be compatible with the international Standard Audit File for Tax (SAF-T).

Modern Digital Communication Between Taxpayers and Tax Authorities

Communication with the tax authorities, which often still takes place on paper, remains an obstacle to efficient tax audits. Communication by email is generally not possible because of tax confidentiality requirements. Digital data rooms for exchanging data and communicating between businesses and the tax authorities, which have already been introduced by individual federal states, therefore represent a forward-looking approach ("Securebox" in Bavaria, "HessenDrive" in Hesse and "SHDrive" in Schleswig-Holstein). However, it is crucial that the federal states do not each develop their own procedures. Instead, existing initiatives should be consolidated into a uniform approach. Standards should also be established for digitally integrating taxpayers into the audit process itself, for example when responding to auditors' requests for information.

A Digitalization Boost Through Internal Tax Control Systems

Further significant potential for digitalization lies in incorporating internal tax control systems (Tax CMS) into audits. A growing number of companies are implementing these systems to ensure tax compliance. They are often tailored to the specific needs of each company and aligned with its IT infrastructure.

Until 2029, internal tax control systems may be taken into account in audits under a statutory pilot provision. If an effective tax control system is in place, the tax authorities may issue a binding commitment to limit investigative measures in future audits. Specifically, matters involving only a low tax risk may be excluded from the audit. By consistently identifying key audit areas and dispensing with the examination of individual supporting documents, an efficient, process-oriented audit can be achieved. This can also contribute to greater cooperation between companies and the tax authorities (cooperative compliance).

The pilot phase should be used to establish a permanent and legally certain framework. This must include a clear legal consequence: An effective internal tax control system must lead to an expedited, process-oriented audit, rather than leaving this outcome to the discretion of the tax authorities, as is the case under the pilot provision. In this context, general requirements for the design of an internal tax control system may also be appropriate, provided certain conditions are met. However, businesses must retain operational flexibility, and rigid, detailed requirements that would place an excessive burden on them must be avoided. Furthermore, there should be no obligation to obtain independent third-party certification, although companies should remain free to do so voluntarily.

Tax CMS for Accelerating Tax Audits