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Schloss Vianden, Luxemburg
Image: picture alliance/Arco Images GmbH

Tax evasion made easy

Dirk Kaufmann / jlw
January 12, 2013

Some prominent German artists and athletes do not pay taxes in Germany. This is perfectly legal in certain circumstances, but it can sometimes backfire, as Boris Becker found out.


Those who earn a lot of money must also pay a lot of tax. In Germany, the top tax bracket currently sits at 45 percent. For high earners there is no choice other than to pay what the tax office demands, or not pay at all. At least not in Germany, when someone is located abroad and pays taxes there. Well known celebrities, artists, athletes and entrepreneurs like Steffi Graf, Boris Becker, Ralf and Michael Schumacher seem to be doing it.

Choose your country

Paying tax is not a question of nationality, but where you live. Dirk Beyer, a lawyer with LHP in Cologne and a tax law expert tells DW in an interview that someone cannot simply choose where they want to pay their taxes. But, "freedom of movement within the EU [European Union] exists, and from that alone, one is able to effectively choose. And its from that point, that respective tax law takes effect."

Thomas Eigenthaler, Chairman of the German Tax Union (DSTG) agrees, "in general it is true that it depends on where you reside." Tax evaders buy or rent homes and apartments in Switzerland or Monaco, in Cyprus or the Canary Islands as if it were their new residence. Bayer says this is because "some countries have much lower tax rates. In Cyprus, for example, it is at 10 percent. There are countries with 12.5 and 15 percent."

Monaco Monte Carlo (Copyright: cc-by-sa-3.0/Martinp1)
Monaco, a favored destination for tax evadersImage: cc-by-sa-3.0/Martinp1

The pitfalls of relocation

Those who live abroad are of course still allowed to come back to Germany to pursue business, meet with friends, or visit family. However, you are not allowed to be in Germany for more than 183 days a year, otherwise the tax office may become suspicious and launch an audit. But that's not all.

German tennis star Boris Becker experienced this in the 1980s. His main residence was in Monaco and that is where he paid his taxes. However, he had told the German tax authority that he lived in Munich - and that had its consequences.

Becker wasn't in Munich for more than 183 days in any given year, the house he stayed in belonged to his sister, the rent was paid by his parents – but, Becker had the key. The tax office concluded that the athletes main place of residence was not clearly and exclusively on the Medeterranian. Becker was forced to pay tax in Germany, costing the tennis star millions of dollars and earning him a conviction.

The price of unity, justice and freedom

Whether a move abroad only serves as a means not to pay tax in Germany remains to be seen - but a certain suspicion quickly arises nevertheless: Never are there stories of prominent people relocating to Sweden with its sky rocketing taxes. Much in demand, on the other hand, are countries that do have an intact nature and good infrastructure, but above all, low tax rates.

Tax evasion or avoidance is still considered by many to be a minor offence, complains DTSG's Eigenthaler. He finds it "immoral to simply dash off," because taxes, he argues, are "the price paid for unity, justice and freedom."

ARCHIV - Der 17-jährige Boris Becker hechtet während des Turniers in Wimbledon im Juli 1985 hinter einem Ball her. Er stand zwölf Wochen an der Spitze der Tennis- Weltrangliste - die Nummer eins in den Klatschspalten ist Becker (41) schon seit fast einem Vierteljahrhundert. Der dreimalige Wimbledonsieger hat auf dem Platz Heldentaten vollbracht und privat Kapriolen geschlagen, wie es kein anderer deutscher Sportler vermochte. Am Freitag (12.06.2009) hat Becker zum zweiten Mal geheirat: In St. Moritz gab er der Niederländerin Sharlely Kerssenberg das Jawort. Foto: Rüdiger Schrader dpa +++(c) dpa - Bildfunk+++
Boris Becker, tennis pro and tax evaderImage: picture-alliance/ dpa

Evasion too easy

Eigenthaler argues tax evasion is too easy in Germany, because "the finance ministers in the Republic don't do enough to tackle tax evasion and avoidance." In order to discover and pursue people for tax crimes, the authorities must have more staff to investigate. Instead, he says, quite the opposite has happened, "staff numbers have been reduced, by approximately 10 percent nationwide."

Patriotism and pragmatism

Eigenthaler has a suggestion about how best to tackle this problem: "Why not add tax to one's nationality," especially athletes like Boris Becker and Michael Schumacher who are revered as national heroes in Germany. They would need to weigh up whether "patriotism prevails or whether they are willing to give up their citizenship."

Thomas Eigenthaler (Photo: Axel Schmidt/dapd)
Thomas Eigenthaler says more money is needed for the taxmanImage: dapd

Dirk Beyer is sceptical. In principle the idea is a good one, he tells DW in an interview, but it's not practical. A German national living abroad, earning money, has to pay tax in far-away Germany? That would be difficult because the tax office would "also have to have investigative powers in other countries." That wouldn't work because investigative authority ends at a country's border.

Generally not recommended

Tax evasion, argues Beyer, is becoming more and more risky because politicians have recognized the seriousness of the situation. Starting this year, "spontaneous information exchange" within the European Union will occur. "For example, Dutch tax authorities will be able to report individual cases to Germany without a specific request to do so." Beyer adds, "shifting wealth, or re-re-locating is simply not recommended."

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