How far can tax authorities and secret services go in terms of data protection?

Most of the time, this is done out of insight into the need, but sometimes only because of the legal obligation, which causes the citizens to pay the required amount to the tax office. There are numerous methods to keep the tax burden as low as possible or to avoid the payment altogether. The possibilities for legal or illegal “tax design” are verydistributed differently. While employees’ wage tax is retained directly from salary, there is significantly greater scope for tax avoidance for the self-employed and companies.

The efforts of the tax authorities against tax evasion

It is obvious that the financial authorities are striving to counteract the widespread practice of tax evasion. This is not only legally permissible, but also justified. Nevertheless, the question arises as to how far the tax offices are allowed to go and what resources are available to them. Other state institutions are also interested, such asSocial or law enforcement, occasionally for financial data, bank details and cash flows. Particularly relevant here is the powers of the authorities to access personal data stored by banks.

The misunderstanding of the “banking secrecy”

In discussions about state access to financial information, the term “banking secrecy” is often used. This is, however, primarily a misunderstanding. Many bank customers and the public mistakenly assume that payment transaction data is particularly protected by law – similar to telephone data through the secret of the telecommunications, medical information through theMedical confidentiality or social data through social secrets.

Real legal status of banking secrecy

However, this assumption is wrong and widespread. In Germany (in contrast to Switzerland or Austria), banking secrecy is based exclusively on a contractual agreement between banks and customers. The obligation to maintain confidentiality about all customer-related facts and valuations is anchored in the general terms and conditions of the banks. thisDuty begins when the business relationship is initiated and also continues after its termination. However, banking secrecy is of little importance today; Objections with reference to banking secrecy are therefore not legally tenable.

Confidentiality and protection of sensitive financial data

Regardless of the legal status of banking secrecy, information about financial circumstances, business relationships, payments to or from social security agencies and the settlement of medical bills is considered to be particularly worthy of protection. In order to gain the trust of customers, the banking industry is committed to strict confidentiality. From this follows onePurpose: Bank data may not be passed on to credit agencies or other third parties without the customer’s consent, nor may it be used for other purposes. Banking secrecy has consequences under civil law. If a bank passes on unauthorized information about a customer’s financial circumstances to third parties, the latter can assert claims for injunctive relief or damages.

State access rights to financial data

State claims for information and access to financial data exist for different purposes, for example in the context of taxation procedures or to combat crime. These powers have been expanded several times. For example, laws on counter-terrorism have law enforcement and police authorities as well as intelligence services (such as the Office for the Protection of the Constitution, the Federal Intelligence Service andmilitary protection service) granted the right to obtain information about customer relationships and payment transactions. In addition, an automated retrieval of account information has been established: All credit institutions must keep a special file that the Federal Financial Supervisory Authority (BaFin) can access automatically and whose data it can be sent to law enforcement agenciesforwards. The account master data of the customers can be called up online in order to quickly identify which institutions a person or a company maintains account details with.

The automated account data query system

This procedure was originally intended to combat international terrorism and money laundering and was extended to tax offices and other authorities by the “Tax Promoting Activity Act” in 2003. Account data retrieval is particularly permissible if it is required to determine or collect taxes. In addition, other authorities have access toBank data, if you apply a law that ties in with “the terms of the Income Tax Act”. Exactly which authorities these are remains unclear, since income tax law uses numerous terms (such as income, income or child benefit). Both credit institutions and account holders initially do not learn anything about data retrieval. Currently, a procedure is examining beforeFederal Constitutional Court, whether the account retrieval procedure is compatible with the constitutional principles.

Future plans and legal challenges

A possible solution could be the so-called withholding tax, in which capital gains are taxed more than before directly at the source – i.e. with the banks. If the federal government’s plans announced in spring 2007 are implemented, this would also eliminate the reason for the account data retrieval by tax authorities. Nevertheless, the Federal Ministry of Finance has so far stuck to itsThe project is stipulated to significantly expand the capacities for the automated retrieval of account data – there is talk of up to 5000 retrievals per day.

Constitutional concerns about account retrieval

However, the ministry may have to reconsider its plans after the Federal Constitutional Court declared certain legal requirements for account data retrieval in July 2007 to be unconstitutional. It is particularly important here that the court determines that account queries must not be routinely or “into the blue” and are limited to specific suspected caseshave to.

Future developments and data protection issues

There is no sign that the state interest in insight into the financial and wealth-related circumstances of the citizens will decrease. Rather, it is to be expected that, in view of increasingly meaningful payment transaction data, transaction information will be increasingly accessed in the future – in particular to investigate criminal offenses or to determine tax-relevantfacts. A privacy-friendly solution could be to protect banking secrecy – as in some southern neighboring countries – by law. However, it seems more than questionable whether this will actually be implemented.