Stand der Gesetzgebung

Public Hearing: The role and future of the liberal professions in European civil society 2020 The view of Tax Advisers and Auditors in Germany

E 06/13 | 18.09.2013

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Dear Sir or Madam,

Deutscher Steuerberaterverband (DStV) unites more than 35,000 members of the tax advising and auditing professions in Germany who are voluntarily organised in DStV´s 15 regional member associations.

We would like to thank you for this invitation to contribute on this topic. Please find below our answers to your questionnaire:

1. Nature and organisation

What does your profession involve?

German Tax Advisers are allowed to provide services regarding to tax and accounting and partly legal services. Tax services include tax filing and tax advisory services. Accounting services contains the bookkeeping as well as closing the books and preparing the annual financial statements. Tax advisers are allowed to provide legal services in the case of fiscal court proceedings as well as criminal cases based on fiscal offences. Legal services outside this scope are allowed as ancillary services to tax advisory. Tax Advisers can also be Auditors or German Sworn Auditors.

Is your profession subject to any regulation?

German Tax advisers are subject to the regulation of the Tax Advisers Act (Steuerberatungsgesetz). This law regulates the requirements to qualify for the profession, the services, that may be provided by tax advisors, the fundamental principles of the profession, the rules for a tax adviser company, the rights and obligations for tax advisers, the professional conduct, the jurisdiction and the procedural law concerning the tax advisors act. Furthermore there is a code of ethics (Berufsordnung der Steuerberater) which is published by the regulating body, the Federal Chamber of Tax Advisers. Breaches of the code of ethics can be punished by one of the 21 regional chambers.
The regulation of tax advising services as well as the tax advisers themselves has two main goals: To ensure a good level of quality and to protect consumers. In tax purposes, tax advisors do have the same power like lawyers, including the representation of clients. Because of this a state exam is needed.

Is additional regulation needed for your profession to develop further? Are common European rules needed?

We believe that the German scope of regulation is on a broad but useful level to reach the goals of the regulation. At the moment not any additional regulation or deregulation is seen needful to develop further.

With respect to the complexness of tax laws in every European country an information asymmetry between the adviser and the client regarding both, needed effort and provided quality, can be observed. Referring to this market imperfection we find it useful to ensure at least the quality through regulation. Since the quality of tax advising services mainly depends on the knowledge of the laws and the jurisdiction an entrance examination to the profession should be necessary. To safeguard the consumer protection on an appropriate level the professional title gained through this examination should be linked to certain services that can only be provided by professionals with a reasonable level of qualification.

Different Forms of Practitioners

Tax Advisers may provide their services as self-employed people. They may also work for another tax adviser or tax advising partnership or company. Tax advisers that are employed in a company outside the profession can also use the title if they mainly work in the scope of tax services within that company and provide tax services on a self-employed basis as a spare-time work.

How big are the businesses of the profession?

At 1 Jan 2013 there existed 53,647 practices. 37,613 of them were sole practitioners, 7,176 of them were partnerships and 8,858 were incorporated.
In an opinion survey we ran in 2012, the mean number of employees including partners in a practice is 9.9, while the median practice consists of 7.0 people.

What forms of practice are recognized under company law?

Nearly all types of companies are allowed to be tax adviser companies, but the Majority of the voting rights must be held by tax advisers. Even though the shareholders of a Tax Adviser’s Company or Partnership may only be persons or enterprises that are allowed to provide tax advising services.

2. Social impact

To what extent does your profession impact on others? Do you fulfill any special duties on behalf of the state?

Tax advisers are judicial officials and therefore have an impact on the enforcement of the tax laws. In the economic point of view, German tax advisers are the preferred counsel of companies, especially for the small and medium enterprises in nearly every playing field: accounting, tax and business advisory. Due to the deep and timely knowledge of nearly every process and action in a client’s enterprise, entrepreneurs attach great importance to the suggestions of Tax Advisers. Especially entrepreneurs of small and medium companies appreciate the work of their counsel as a contribution to their success.

To what extent does your profession present challenges and opportunities for balancing work and family?

Whilst the accredited professionals in our profession are almost two third male, 77 % of the people entering the profession (as accountants or tax associates) are female. These are the potential accredited professionals of tomorrow. But today this quota is somehow not yet represented in the executive and leading level of tax advisers companies. Even if part time working and flexible working time are possible and become more and more common we need to make the professional level more attractive to women.

3. Quality Control and consumer protection

What is the USP?

The USP of tax advisers is to offer integrated advisory services for private individuals as well as for undertakings. Tax advisers do have an extraordinary knowledge of tax, heritage and corporate law, of business administration, controlling and investment theory. So tax advisers are in the position to provide timely information and ad hoc advisory to the full extent whenever it is needed.

Do you think that if your profession were not subject to existing regulation it would be practised to the same standard, or better, in terms of quality, consumer protection, initial and further professional training, and social responsibility?

To the reason that German tax laws are so extensive, we believe that less regulation would lead to a strong uncertainty regarding the knowledge of the service provider. Especially tax advisory services are strongly linked to the national tax law. This explains why in Germany permanent services may only be provided by persons who passed the German exam of tax advisers, auditors or lawyers and have got the professional title. So the possibility of offering tax advisory services without proven knowledge in German tax law would lead to a lower quality level and a loose of trust in the counsels.
Even in questions of professional indemnity insurance a reduction of the regulation could lead to less consumer protection. We believe that having a professional indemnity assurance should be in the interest and an indication for the accountability of the tax adviser. But without a legal obligation there would surely be some who want to avoid these costs.
Having a look of social responsibility of tax advisers we believe that having access to legal services (like tax advising) within a moderate distance is one part of the right of legal assistance and representation. Some regulation ensures coverage of the rural areas as well. As we have mentioned before most of German tax advisers are working as sole practitioners what helps a broad coverage.
We believe that the abolition of the fee regulation and of the ban of outside ownership would lead to a higher market concentration and therefore to a concentration of service providers in cities and metropolitan areas.

Is your profession based on a special form of trust? Is this particularly formalized and protected, and is it linked to natural persons?

There is a special form of mutual trust between the tax adviser and his client. This trust is protected by law in two ways: The obligation to confidentiality is codified in the professional affairs act for tax advisers, a violation can be considered a criminal offence and punished by criminal law. The second way that protects the mutual trust between the two parties is the right of the tax advisor to refuse to give evidence regarding nearly every information he gets during the contractual relationship. These laws are not restricted to natural persons.

Does your profession require special knowledge or a particular qualification? What role does a knowledge edge play in the practice of your profession? How is further training organised in your profession? How should it be organised?

The use of the professional title “Steuerberater” and the exercise of tax advisory activities require a particular qualification. To qualify for the profession practical training in the field of tax or accounting is needed. The amount of training depends on the academic level of the person and ranges from 10 years (without academic background) and 2 years (with a masters degree). Candidates have to pass a qualifying exam that consists of three parts containing tax laws, accounting and procedural law.
Continues training is codified in the law of the tax advisors, but there is no minimum amount of training that has to be done, the amount of training lies in the personal responsibility of every tax adviser. Experience shows that German Tax Advisers and Auditors improve their skills in trainings in many 10,000 cases a year. The associations play an important role by providing up-to-date training possibilities.
A knowledge edge can be gained by practical experience and special training. To use a signaling effect, one can do a specialization to a certified advisor (“Fachberater”), which is offered by the chamber (Certified Adviser for international tax Law and Certified Advisor for tariffs and excise taxes) or the association of tax advisors (Certified Adviser for rating; Certified Adviser for restructuring and insolvency; Certified Adviser for execution of wills and administration of estates; Certified adviser for business transfer; Certified Adviser for international Accounting; Certified Adviser for Controlling and finance management and Certified Adviser for mediation).
To use an additional signaling effect towards clients, one can acquire the quality seal granted by our association (“DStV-Qualitätssiegel”). This seal includes a proof of the tax adviser’s organization regarding the requirements of ISO 9001 as well as special requirements for tax advising services. Since the DStV also supports the practices in questions of practice management, it assists the European Commission’s request in the service directive for a voluntary quality assurance.

How is liability determined in your profession?

For all services provided the client remains liable for the accuracy and completeness when fulfilling their duties. If the tax adviser makes a mistake, the client may have the right to recourse anyway. To protect the clients, tax advisers need to have a professional indemnity assurance with a minimum amount of 250,000 EUR per case and 1,000,000 EUR per year.

Does your profession follow a system of prevention or regressive compensation?

There is a binding regulation on fees charged by the tax advisers. The “Steuerberatervergütungsverordnung” applies on all regulated activities and sets a fee margin that depends on the assessment basis. Within this margin the tax adviser has to take into account many different characteristics of the case, for example the scale, complexity or the risk. Maximum fees of the margin may only be exceeded by written agreement.
Because of the complexity of the tax laws, it is nearly impossible for the clients to estimate the amount of work that is needed for a specific procedure, so we believe that the price regulation is a strong tool for consumer protection.

4. Economic development

How has your profession developed economically in recent years, and what sort of trend do you anticipate? (Turnover and return, access to financing, number of practitioners and trainees)

The number of tax advisers has constantly risen since the early 1960’s (1960: 23,919; 1980: 37,402; 1990: 45,397; 2000: 52,749; 2010: 78,110; 2013: 82,390). Actually 57.000 of them are self employed.
The average personal income of a tax adviser is an amount of 89,000 EUR (2007), the turnover of a tax adviser practice was on average 390,000 EUR (2010; 368,000 EUR in 2007).
Whilst the investment needs are quite low in daily business, just 12 % of the tax advisers think that the access to financing is insufficient. A larger amount of money is only needed in times of acquiring a company, partnership or shares of it. We do not observe great lacks of access to financing in these cases in times the prices are fair according to the value of the practices. The equity structure of tax adviser practices is also regulated in Germany: The equity must be hold by a person or a company that is allowed to provide tax advisory services itself (Tax adviser, auditor, lawyer, or a practice of these professions). It’s interesting, that 86 % of the tax advisers believe that allowing private investors to invest in their practice would have a negative impact on their independence.

What share of services provided by your profession is exported? Do you operate in a single European market in your profession? How compatible are business models and regulation within Europe?

Only a very small number, mainly very large or sometimes specialized practices operate in the European single market. There are some reasons why cross border activities of tax advisers are very low: The two main reasons are knowledge of the foreign law and language skills. Tax advising highly depends on local law and the knowledge of foreign law is lacking, because of the complexity of tax law in every country. The tax advisers code of ethics demands not to provide services if the service quality would not be on an adequate level. In practice, most clients in need for cross-border tax advice can be served by referring them to a qualified professional in the country for which advice is sought; this may take place within the same network or through a recommendation by the client´s home country tax adviser.

Developing new services

As the provided services depend on the needs of the customers, tax advising services changed somehow. Especially small and medium companies demand an integrated advisory service from their tax advisers so that the service scope has shifted towards managerial counseling.

We hope you find our contribution helpful and we would be grateful for the opportunity to speak at the public hearing.
If you have any questions please do not hesitate to contact us.

Sincerely yours

Prof. Dr. Axel Pestke
Managing Director

StB René Bittner
European Affairs Officer

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