Inspections by the Tax Office: How to Prevent Digital Snooping
These days, careful is the name of the game when the Finanzamt announces a visit to audit your tax records. Even if your company is “only” middle-sized, you can expect that the officer will also want to scrutinize your digital data. Not only will the officer turn your company “topsy-turvy” but you can also expect him to be nosy in the hope of accidentally finding out something that might lead to higher taxation.
Since 2002, auditors have been allowed to inspect your company's digital data and use your computer system to fulfill their audit. In other words, upon expressed wish you must enable the officer to read all relevant data. Relevant are all such data from financial accounting, and the accounting of costs, inventory, and assets, as well as wages. However, the audit does not necessarily have to take place at your office; they might want the information stored on a DVD to take with them.
The tax auditor is authorized to talk not only with the person you designate as their contact (beautiful lady with long curly blond hair, tempting smile…) but also anybody else in your company. So instruct everybody on the auditor’s visit to best remain silent towards the officer.
Tax auditors are the comprehensive measure for detecting tax irregularities. If you want to prevent too much investigation, know your means of defense. The most important thing to know is their capacity to test your data. A lot of your data might be of interest for the auditor, but might be none of his business: e.g. internal documents like order books, financial and fiscal planning, personnel files, third party data, correspondence with attorneys or tax advisers – especially on tax questions.
If you do not have any security measures and the auditor accidentally bumps into such data, he will start asking questions and you will be the fool! The best advice is not to store such data in your system in the first place…
Usually the tax office will send you a form regarding your company's electronic equipment. Answer as completely as possible in order to shorten the auditor’s visit.
It is not at all a bad idea to have your attorney or tax consultant either in the office or readily available on the phone. Presumably, you will be pretty nervous and might say too much; your consultant will be able to prevent the worst. At the very latest, he or she should assist you at the hearing to discuss the discovered facts.