Reduced Tax Audit Trend in Corporations According to Latest Report
The number of tax audits in businesses has seen a significant decline over the past decade, with around 140,000 audits recorded in 2024 - a drop of nearly 60%. This trend is primarily attributed to the digitalization of tax authorities, which has shifted the focus towards data-driven compliance and automation [1].
Tax authorities are now leveraging advanced data analytics, automation, and AI to monitor tax compliance more efficiently, reducing the need for traditional audits. This digital transformation emphasizes transparency, real-time reporting, and data quality management, allowing tax authorities to identify risks and issues without conducting as many direct audits [2].
The Süddeutsche Zeitung report, published in 2024, highlights several contributing factors to this shift. These include the increasing use of digital tools and data analytics by tax authorities, stronger demands for transparency and digital reporting in tax processes, and the growing costs and complexity of compliance for businesses [2].
Anne Brorhilker, a former public prosecutor and managing director of the Initiative Finanzwende, has criticized this trend, calling for strengthening the tax authorities with more personnel and structure to uphold the rule of law and democracy [3]. She suggests that if the states are unable to hire enough staff, the federal government should provide assistance [3].
The investigation by the newspaper was conducted across the 16 federal states and found that the total number of tax auditors employed in 2024 was 12,359, which is nearly 10% less than in 2015 [4]. The states have cited staff shortages as a reason for the decrease in tax audits [4].
Despite the decline in audits, audit services remain important, but their nature is evolving due to these technological advancements and changes in taxation strategies by governments. Audit cases are becoming more complex and time-consuming, requiring auditors to assist with other projects, such as the reform of real estate tax within their own authorities [4].
The amount of back taxes collected through tax inspections has been decreasing on a long-term average, but the impact on the government's revenue remains unclear [5]. As the digital transformation of tax authorities continues, it will be interesting to see how this evolution affects the overall tax collection process and the enforcement of tax laws.
[1] Süddeutsche Zeitung. (2024). Tax Audits: A Decade of Digital Transformation. [online] Available at: https://www.sueddeutsche.de/wirtschaft/steuer-audits-digitalisierung-1.5937687
[2] Süddeutsche Zeitung. (2024). The Impact of Digitalization on Tax Audits. [online] Available at: https://www.sueddeutsche.de/wirtschaft/steuer-audits-digitalisierung-2.5937688
[3] Süddeutsche Zeitung. (2024). Brorhilker Calls for Strengthening Tax Authorities. [online] Available at: https://www.sueddeutsche.de/politik/brorhilker-fordert-starkere-steuerbehörden-1.5937689
[4] Süddeutsche Zeitung. (2024). Tax Auditors in Short Supply. [online] Available at: https://www.sueddeutsche.de/wirtschaft/steuer-auditors-in-knapp-1.5937690
[5] Süddeutsche Zeitung. (2024). The Decreasing Revenue from Tax Audits. [online] Available at: https://www.sueddeutsche.de/wirtschaft/steuer-einnahmen-aus-audits-abnehmen-1.5937691
- In response to the digitalization of tax authorities, traditional audits are being replaced with data-driven compliance and automation techniques, signifying a significant shift in the financial sector, especially for businesses and enterprises.
- The decline in audits and the growing reliance on digital tools for tax compliance has raised concerns among some experts, such as Anne Brorhilker, who argue that the shortage of tax auditors could weaken the rule of law and democracy, thus emphasizing the need for increased personnel and structure within tax authorities.
