The Act on the Combat of Tax Fraud, which recently passed the German Bundesrat, empowers the German federal government to specify the information duties which taxpayers must fulfil in order to be granted tax relief or deductibility of expenses when dealing with tax haven states.

The federal government has now published the draft of a regulation which sets forth these duties. The regulation does not, however, name the states which will be considered tax havens; rather it empowers the Federal Ministry of Finance to publish the list as a decree. This approach was reportedly chosen in order to allow monitoring of further developments in the field of international information exchange which can then be reflected in the tax haven list on a regular basis.

The problem with this approach, however, is that it shifts accountability for the legislative enactment procedure from parliament to the executive branch. Since the German constitution specifies that the law-making process is the responsibility of the German parliament (Bundestag and Bundesrat) and can only be transferred to the executive branch by a law which defines the content, purpose and scope of the decree to be created by the executive branch, the question arises as to whether the law-making method chosen in regard to tax havens is in accordance with the German constitution.

Therefore, it can be assumed that the constitutionality of the Federal Ministry of Finance decree will be challenged as soon as the tax haven list is published with the issue potentially passing to the Federal Constitutional Court for decision.