The German Federal Ministry of Finance, under Minister Lars Klingbeil (SPD), is planning to intensify efforts to combat tax evasion. An internal draft law, titled “Towards Modernization and Digitalization of the Fight Against Shadow Work” reveals intentions to strengthen controls and adapt strategies to address evolving challenges. The draft, reported by “Handelsblatt”, outlines new measures aimed at improving resource allocation and increasing the effectiveness of investigations.
The Ministry anticipates generating additional revenue for the federal budget totaling €280.5 million between 2026 and 2029. However, the implementation of the law will necessitate initial and ongoing expenditures totaling approximately €465 million during the first four years after its enactment. The Ministry declined to comment further on these figures, citing ongoing departmental coordination.
Projections indicate that the combined additional income for the federal government, regional states (Länder) and social security institutions is expected to reach €858.4 million by 2029. The largest share of this revenue – €538.7 million – will accrue to social security entities, followed by the Länder (€188.2 million). The federal government’s projected additional revenue for 2029 stands at €131.5 million.
The proposed legislation focuses on strengthening the Federal Fiscal Control for Shadow Work (FKS), emphasizing improved intelligence gathering and information sharing to optimize resource deployment and ultimately increase the success rate of investigations. The draft highlights a move away from superficial infractions towards addressing more significant violations.
Furthermore, the Ministry intends to update the list of sectors considered particularly vulnerable to shadow work and illegal employment to reflect current economic trends. The inclusion of the hairdressing and cosmetics industries is specifically mentioned, with the rationale being that associated obligations, such as mandatory identification, will enhance the FKS’s ability to conduct effective assessments.
