The German Federal Cabinet has initiated a reform of the Tax Advisory Act, a move framed by the Federal Ministry of Finance as a necessary modernization intended to reduce bureaucratic hurdles and broaden the scope of available advisory services for citizens. The proposed legislation, unveiled Wednesday, signals a potential shift in the regulatory landscape for tax advice and carries implications for both businesses and taxpayer assistance organizations.
Federal Finance Minister Lars Klingbeil (SPD) justified the reform as a response to the accelerating digitalization of the working world, emphasizing the need for the tax advisory framework to adapt accordingly. A key component of the reform targets the Gewerbesteuer, or trade tax, aiming to curtail the practice of companies relocating their registered offices solely to municipalities with lower tax rates – a maneuver often criticized as undermining regional fiscal stability.
The draft law’s provisions concerning Lohnsteuerhilfevereine, taxpayer assistance associations, are particularly noteworthy. Current limitations on the activities these associations can undertake are slated for revision, with proposed removals of existing threshold restrictions and the allowance for a single individual to manage up to three advisory locations. This deregulation has already drawn scrutiny, with critics arguing that it could potentially dilute the quality of advice and lead to a more competitive and potentially less regulated, environment for taxpayer assistance.
While proponents portray the changes as simplifying processes and enhancing access to professional guidance, some economists and legal experts suggest the loosening of regulations for Lohnsteuerhilfevereine warrants closer monitoring. Concerns exist that the increased capacity and reduced oversight could inadvertently increase the risk of errors or inadequate advice, potentially impacting taxpayers. The reform’s impact on the competitive landscape within the tax advisory sector and its long-term effect on the fairness and efficiency of the German tax system, will be subjects of ongoing debate and observation. The legislation is expected to face parliamentary review and could be subject to further amendments before its ratification.