Germany: Tax Simplification: Finance Ministry Reports Progress On Streamlining Procedures

Ultimately, the tax administration hopes to do away with paper altogether and to assess and collect income tax entirely online. The first major step in this direction - electronic filing of returns - has already been taken. More than a million income tax returns were filed online in 2003, although these were followed up by a hardcopy summary in almost every case because the electronic signature procedures are seen by many as being too clumsy. Also, certain hardcopy vouchers - such as receipts for charitable donations - are still required by law. The latest progress report published by the ministry of finance exudes official optimism that these and other hindrances can be overcome and that online return filing and assessment will soon be the norm. The next major step is to digitise the entire administration of the "wages" tax system of deducting income tax at source from employee remuneration. Pilot projects are in process in some provinces, and results to date give hope of universal application in the not too distant future. The present communication links would be reduced to those necessary between taxpayer, employer and the tax office, so that the tax card and salary data would be automatically transmitted to and from the administration, leaving the employee with a simple import into his own tax return at the end of the year. A risk management system would be used to automate return reviews in simple cases, leaving the assessment officials free to concentrate their personal efforts on more complicated issues involving larger sums. Hardcopy arrangements will, however, continue to be available for those who do not have computers. The report is silent on arrangements for the reporting and verification of foreign income.

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