In the past, there were repeated instances of fiddling the till and „forgetting“ to record sales. No wonder that the legislation has become increasingly strict and stringent. Nevertheless, many businesses still operate according to their own rules when it comes to recording turnover. Not the best idea, say Viktor Rebant and Gregor Danielmeyer on „hsp live at 11“. The livestream focuses on four critical errors in till management that reputable traders should avoid. The errors relate to fields left blank, the obligation to provide a receipt (Italy), an outdated till system and Section 379 of the German Fiscal Code (AO) (tax risk).
Viktor Rebant is an ICS specialist at Innotax GmbH and also a lecturer at the hsp Academy, primarily on the subject of Internal Control System. His module forms part of the Continuing professional development course in digitalisation consultancy. Viktor frequently advises companies with complex till systems and stock management systems. Today, he brings his perspective as a consultant to the discussion. Gregor Danielmeyer works as a case officer for the state of North Rhine-Westphalia and has already provided deep insights into the future of tax audits in a special series of „hsp live um 11“. He previously worked as a tax inspector. As always, Gregor is appearing as a private individual and is expressing solely his own opinions and views as a private individual.
Error 1: No input
We’ll start with a classic audit scenario. It’s not uncommon for the tax inspector to first sit down in a restaurant as a customer and observe what’s going on. If they spot anything suspicious, things could get tricky for the establishment. Viktor points out that restaurants using an electronic ordering system make it harder to make mistakes, as orders are entered into the system directly at the table. If everything is done on slips of paper and something is forgotten, it is almost always a case of deliberate misconduct. At this point, Gregor interjects, pointing out that it is not always the management who act with malicious intent. Even a member of the waiting staff who helps themselves to money from the till and conceals it is more than enough.
Discrepancies in the till are not unusual, but they should be properly recorded at the end of the day. According to Gregor, there are, of course, frequent instances where too much or too little money is accidentally handed out, without anyone acting with malicious intent. Missing entries are a more serious issue here than a lack of reconciliation at the end of the day.
Mistake 2: Obligation to retain receipts (Italy)
Next, Gregor shows a receipt from Italy that he received himself. It’s for a haircut. According to the receipt, 10 euros were charged, but Gregor actually paid 25. So, whilst 10 euros were declared for tax purposes and the requirement to provide a receipt was observed, the operator still brazenly cheated the system, pocketing 15 euros without declaring it to the tax authorities. Gregor therefore does not consider the Italian system to be ideal either.
Viktor points out, however, that in Germany there is only an obligation to issue receipts. Without a requirement to take the receipt with you, this causes frustration amongst businesses, as the example of the bakeries in early 2020 showed. A requirement to take the receipt with you raises customers’ awareness of the issue of receipts. In his view, a requirement to take receipts home should also have been introduced in Germany. This would also have acted as a driver of innovation, as providers would have emerged to develop digital solutions offering added value. The obligation to issue receipts concentrates all development within individual companies, leading to countless isolated solutions rather than collective innovation.
Mistake 3: an outdated till system
Gregor Danielmeyer presents two receipts as an example of an outdated till system. He had bought a filled bread roll at a bakery one day and a pretzel the next. Nevertheless, he was given two receipts, both for an item in product group 001. However, there are different prices within this product group, and precise product descriptions are missing. The legal requirement for itemised records has been in place since 2017.
The receipts should therefore state exactly what was sold – in the case of bread rolls, even what was on top of them. As if that weren’t problematic enough, the tax details are also missing. Nor do the receipts indicate whether the food was consumed on the premises or taken away. Consequently, this means that the till records have been incorrect every year since 2017. As it is no longer possible at all to trace what was sold and when, this situation amounts to nothing more than an estimate.
In an open system such as beer sales at a stadium, a method should be found to keep a traceable record of sales. Major Bundesliga clubs use digital solutions; at a Sunday match in the Verbandsliga, it would be possible to record how many kegs were sold. Viktor emphasises that, whilst there is an ‘unreasonableness’ clause, it is hardly ever applied nowadays, as situations of unreasonableness are almost non-existent. This is due to technological progress, which has meant that the tools required for accurate record-keeping have become increasingly simple and affordable.
Incidentally, all receipts are also missing the TSE QR code. Whilst there is a provision stating that the obligation is waived if a code that has been ordered is missing, it becomes difficult to prove that the code was ordered if this has not been documented. This makes accurate, comprehensive documentation all the more important.
Proactive advice offers protection
Viktor reports that he approached his clients to draw their attention to the need to update their till systems. Paul asks him whether he merely fulfilled his duty to provide information or whether he also checked whether the matters raised had been implemented. Viktor cannot answer the question with absolute certainty, as he is not on site with the clients. However, information on the subject was issued regularly, so the clients could not have failed to be aware of the POS system issue.
At the end of the day, the companies themselves are responsible. In this regard, Viktor can only emphasise that consultants who specialise in specific clients with cash registers can play an active role. If these clients account for only 1 % of all clients, the tax consultancy firm will not constantly be checking to see whether the health insurance scheme is up to date. Specialised firms can offer a better service, says Viktor.
Error 4: Section 379 of the German Fiscal Code (AO) (risk of tax liability)
Section 379 of the German Fiscal Code (AO) provides the tax authorities with a powerful tool to take decisive action in cases of suspected tax evasion, imposing heavy fines of up to 25,000 euros. Faulty till systems alone are enough to land you in serious trouble. The tax inspectors do not even need to examine the receipts to take action. That is why Viktor is very forthright with his clients on this issue.
Paul gives the example of a large restaurant with many staff members. Once a business reaches a certain size, management can no longer scrutinise every receipt to check whether the accounts are correct. This is where a Tax Compliance Management System (TCMS) is needed, one that provides the workforce with clear guidelines. By using a TCMS, a company can pre-empt any allegations of wilful misconduct. Not to mention that it also helps to avoid simple human errors.
The mistake made here is that many companies – and consultants too – ignore Section 379 of the German Fiscal Code (AO). It is only when the first hefty fine is due that those affected realise it was a costly mistake.
New e-learning course on tax audits Gregor Danielmeyer has just recorded an e-learning course on the digitisation of tax audits. This is a very exciting topic for the future, one for which companies and consultancy firms should be preparing now.
Next week, we’ll have more fresh updates from hsp headquarters in the September update.
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