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Coercive penalty for failure to submit tax returns
The Federal Fiscal Court (BFG) recently clarified that, in cases of late or non‑submission of tax returns, the tax office may, at its own discretion, impose a coercive penalty.
A taxpayer earned income from self‑employment and was initially represented by a tax adviser. Despite repeated requests and threats from the tax office, he did not submit his tax returns on time.
The tax office then initially set a coercive penalty of EUR 300 and increased it to EUR 2,000 after further delays. The taxpayer lodged an appeal against the penalty notices and relied on his financial situation and organisational delays in the bookkeeping. The tax office subsequently reduced the coercive penalty to EUR 1,000, but the taxpayer still applied for a decision on the appeal by the Federal Fiscal Court.
Decision of the Federal Fiscal Court (BFG)
The BFG confirmed that coercive penalties are a permissible tool for the tax authorities to enforce the timely filing of tax returns. This is not a punishment for non‑compliance, but a means of enforcing tax obligations. The taxpayer is thereby directed to fulfil his tax‑law obligations. It is unlawful only where performance is impossible, unreasonable or already provided.
The imposition of a coercive penalty is, in principle and amount, at the discretion of the authority. When setting coercive penalties, the tax office must, within its discretionary decision, take account of the taxpayer’s previous behaviour, the degree of culpability and the taxpayer’s economic circumstances.
The BFG emphasised that, despite multiple reminders, the taxpayer did not make any contact with the tax office to request an extension of the deadline. This negligence was therefore to be considered by the tax office within its discretion. In addition, responsibility for timely submission cannot be transferred to third parties, e.g. the bookkeeper. Organisational delays do not relieve the taxpayer of his duty to submit the returns on time.
Conclusion
Coercive penalties are intended to motivate taxpayers to fulfil their tax‑law obligations. They are not a punitive instrument, but a enforcement mechanism. However, the amount must be proportionate and the tax office must consider the taxpayer’s economic circumstances when setting the penalty.
The tax office then initially set a coercive penalty of EUR 300 and increased it to EUR 2,000 after further delays. The taxpayer lodged an appeal against the penalty notices and relied on his financial situation and organisational delays in the bookkeeping. The tax office subsequently reduced the coercive penalty to EUR 1,000, but the taxpayer still applied for a decision on the appeal by the Federal Fiscal Court.
Decision of the Federal Fiscal Court (BFG)
The BFG confirmed that coercive penalties are a permissible tool for the tax authorities to enforce the timely filing of tax returns. This is not a punishment for non‑compliance, but a means of enforcing tax obligations. The taxpayer is thereby directed to fulfil his tax‑law obligations. It is unlawful only where performance is impossible, unreasonable or already provided.
The imposition of a coercive penalty is, in principle and amount, at the discretion of the authority. When setting coercive penalties, the tax office must, within its discretionary decision, take account of the taxpayer’s previous behaviour, the degree of culpability and the taxpayer’s economic circumstances.
The BFG emphasised that, despite multiple reminders, the taxpayer did not make any contact with the tax office to request an extension of the deadline. This negligence was therefore to be considered by the tax office within its discretion. In addition, responsibility for timely submission cannot be transferred to third parties, e.g. the bookkeeper. Organisational delays do not relieve the taxpayer of his duty to submit the returns on time.
Conclusion
Coercive penalties are intended to motivate taxpayers to fulfil their tax‑law obligations. They are not a punitive instrument, but a enforcement mechanism. However, the amount must be proportionate and the tax office must consider the taxpayer’s economic circumstances when setting the penalty.