Germany: Dialogue about the introduction of CTCs

Joanna Hysi
May 11, 2021

The German Bundesrechnungshof (Federal Audit Office), which is a independent judiciary body that advises various government bodies through non-legally binding recommendations, recently proposed to the Ministry of Finance that a real-time reporting system leveraging blockchain technology would be an efficient system to combat VAT fraud and reduce the VAT loss in Germany which is estimated to around EUR 20 billion yearly. The Federal Audit Office stresses its view that Germany should not fall behind in the race towards Continous Transaction Controls (CTCs) but follow in the footsteps of fellow EU Members States like Italy, Hungary and Spain.

However, the Ministry of Finance (MoF) doesn’t share the same view as the Federal Audit Office and reported that no action for a reform is necessary yet. Specifically, it doesn’t yet deem the proposed measures necessary or appropriate for combating VAT fraud and other compliance risks. The view of the MoF is that such measures would create an unnecessary administrative burden on businesses, and therefore, it proposes that prior to introducing CTCs, a cost-benefit analysis of the proposed measures on businesses should be carried out, taking into account the protection and security of businesses’ data. In addition, it finds that the results from the CTC journeys of fellow Member States, have not proven to be helpful for Germany to decide over the potential implementation of its national CTC system. However, the MoF states that it is actively keeping an eye on the legal and technological developments in the space.

Overall, there is a consensus among all relevant German stakeholders that as online trade is enabling new ways of committing tax fraud, compliance risks can’t be combated by existing compliance measures, e.g. periodic reporting after the transaction has taken place, but instead require modern government controls which leverage secure technology.

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Author

Joanna Hysi

Joanna is a Regulatory Counsel at Sovos TrustWeaver. Based in Stockholm and originally from Greece, Joanna’s background is in commercial and corporate law with research focus on EU law and financial innovation. Joanna earned her degree in Law in Greece and her masters in Commercial and Corporate from London School of Economics and Political Science (LSE) in London.
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