This applies in particular to the use of standardized interfaces for data transmission between businesses and tax authorities. Following the example of payroll tax, these can 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. For auditors, they improve access to data analysis.

The legislature has already established the necessary legal framework for this. This framework must now be brought to life with practical guidelines for the digital interfaces. Close coordination with business practices is crucial here: for example, testing opportunities must be provided for software manufacturers. It is also important to allow for sufficiently long implementation periods to adapt business IT systems. Standardization in the area of data exchange must also be compatible with an international standard (Standard Audit File – Tax, SAF-T).

Modern Digital Communication Between Taxpayers and Tax Authorities

Communication with tax authorities—which often still takes place in paper form—remains a hurdle to efficient tax audits. Communication via email is generally not possible due to tax confidentiality. Therefore, the digital data rooms for data exchange and communication between businesses and tax authorities—which have already been introduced by individual federal states—represent a forward-looking approach (“Securebox” in Bavaria, “HessenDrive” in Hesse, “SHDrive” in Schleswig-Holstein). However, it is crucial that not every federal state develops its own procedures, but rather that existing initiatives are consolidated into a uniform approach. In addition, standards should be established for the digital integration of taxpayers into the audit process itself (e.g., for handling auditor inquiries).

A Digitalization Boost Through Internal Tax Control Systems

Further significant potential for digitization lies in the integration of internal tax control systems (Tax CMS) into audits. These systems are being implemented by a growing number of companies and serve to ensure tax compliance. They are often tailored to the specific needs of each company and aligned with the company’s respective IT infrastructure.

Through 2029, the inclusion of internal tax control systems in audits is possible under a statutory pilot program: If an effective tax control system is in place, the tax authorities can provide a binding commitment to limit future investigative measures. Specifically, this means: Matters involving only a low tax risk may be excluded from the audit. By consistently identifying key audit areas and foregoing the examination of individual 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 includes a clear legal consequence: If an effective internal control system is in place, this must lead to an expedited and process-oriented audit, without this—as in the pilot program—being structured as a discretionary decision by the tax authorities. In this context, framework guidelines for designing an internal control system—subject to certain conditions—may also be useful. It is important that operational flexibility be maintained and that no rigid, detailed requirements be imposed that would overwhelm companies. Furthermore, there should be no obligation to obtain a third-party attestation—which does not preclude companies from doing so on a voluntary basis.

Tax CMS for Accelerating Tax Audits