The Million-Euro Myth

The headline figure sounds bulletproof: one auditor, one million euros. Hire a thousand, recover a billion. Simple, right? Not quite. As seasoned tax professionals point out, these numbers suffer from creative accounting that would make the most aggressive Steuerberater blush.

A significant chunk of those "recovered" taxes isn’t permanently found money, it’s just time-shifted revenue. When a Betriebsprüfer disallows a provision in Year 1, taxes spike. But when that same provision becomes actual expense in Year 2, the tax bill drops accordingly. Over two years, net recovery: zero. But the auditor’s stats look heroic in Year 1, while the inevitable Year 2 loss disappears into a different spreadsheet. The result? Inflated performance metrics that make hiring more staff seem like printing free money, while the real impact remains murky.

Federalism’s Poison Pill

Here’s where German federalism transforms from noble principle into expensive farce. The states (Länder) pay the salaries of tax officials, but the lion’s share of recovered taxes flows to the federal government. It’s like paying for your neighbor’s security system while he gets to keep everything the cameras catch.

This structural mismatch creates perverse incentives. As one finance expert notes, if a state hires more auditors and recovers less revenue locally, more money leaves the state’s coffers for Berlin. The rational move for cash-strapped states? Keep auditor numbers low, let potential federal revenue slip away, and avoid the political headache of explaining why your Finanzbeamte are costing you money while enriching the national budget.

The Bund could intervene, after all, it maintains its own corps of auditors it could deploy. But that would require acknowledging the system is broken, which brings us to the next problem.

When Understaffing Becomes Policy

Anne Brorhilker, the former Cologne prosecutor who unraveled the Cum/Ex scandal, offers a darker interpretation. In her book Cum/Ex, Milliarden und Moral, she argues the personnel shortage isn’t a bug, it’s a feature.

The math is stark: Germany loses an estimated €100 billion annually to systematic tax evasion, enough to fund nearly the entire federal education budget twice over. Yet the very agencies tasked with stopping this hemorrhaging operate with skeleton crews. Brorhilker’s conclusion? A lack of political will to properly staff authorities means they lack capacity to scrutinize the ultra-wealthy who inflict this damage.

The Cum/Ex scandal perfectly illustrates this dynamic. For years, banks and traders systematically claimed tax refunds on dividends they never paid. The scheme was never a legal loophole, it was blatant fraud. But prosecutors lacked the personnel to connect the dots across dozens of institutions and jurisdictions. By the time authorities caught up, the damage reached €40 billion in evaded taxes.

The Brain Drain Dilemma

Even when positions exist, filling them proves nearly impossible. The state pays Finanzwirte salaries that look generous, until you compare them to private sector offers. A qualified tax expert can triple their income by jumping to corporate tax departments or elite law firms.

This creates a talent vacuum where the Finanzamt becomes a training ground for the private sector. Young auditors cut their teeth on complex cases, then exit for salaries that let them actually afford Munich rent. The result? A perpetual cohort of inexperienced staff handling sophisticated tax avoidance schemes designed by their former colleagues now earning triple.

As one observer notes, from industry’s perspective, this is ideal. You want the tax authority staffed with competent-but-not-brilliant auditors who won’t unravel your optimal structures. The top 1% of tax talent? They’re defending those structures for €200,000 a year, not poking holes in them for €60,000.

The Administrative Blob

Here’s a paradox within the paradox: German tax authorities aren’t actually short-staffed in absolute terms. The problem is distribution. As Brorhilker points out, the majority of personnel "direct and redirect", they’re administrators, not investigators.

The operational core, the Steuerfahnder who conduct field audits, the prosecutors who build cases, remains chronically understaffed while bureaucratic layers swell. Shifting staff from internal to external roles requires expensive retraining, and with ongoing personnel shortages in back-office functions, that retraining never happens.

So you get a situation where thousands sit at desks processing routine returns, while complex evasion schemes go uninvestigated because there’s nobody available to leave the office.

What This Means for Ordinary Residents

If you’re reading this while stressing about your Steuererklärung, you might wonder: why should I care? I pay my taxes. I don’t have a Cayman shell company.

You should care because this systematic under-enforcement creates a two-tier tax system. The salaried employee has every euro automatically reported and taxed. The freelancer or small business owner faces increasingly aggressive audits on modest deductions. Meanwhile, sophisticated evasion at the top goes unchecked because it requires resources the Finanzamt doesn’t have.

The €100 billion annual shortfall doesn’t vanish, it gets redistributed through higher rates, reduced services, or delayed infrastructure. That swimming pool closing in your district? The crumbling S-Bahn? Part of that is revenue that should exist but doesn’t, because the state won’t pay for the investigators who’d recover it.

The Lobby Factor

The financial sector doesn’t just benefit from this dysfunction, it actively maintains it. Lobbyists frame tax enforcement as "bureaucratic overreach" and push for "streamlining" that actually means fewer controls. They argue tax law is too complex for ordinary officials to understand, creating a self-fulfilling prophecy: underfund training, claim staff aren’t qualified, then use that as justification for not hiring.

This influence operates quietly. While media fixates on Bürgergeld recipients supposedly cheating the system of a few hundred euros, the sophisticated pillaging of state revenue by financial institutions receives minimal scrutiny. The lobby ensures the conversation stays focused on small-time fraud, not systemic evasion.

Brorhilker now leads financial crime initiatives at Finanzwende e.V., an organization explicitly designed as counterweight to financial lobby power. Her message: these crimes can be proven, but only with ambitious investigators and supervisors who don’t obstruct them.

Breaking the Cycle

So why won’t Germany hire more auditors? Because the current arrangement serves too many interests. States save on salaries. The federal government avoids confronting wealthy evaders. Private sector poaches talent. Lobbyists maintain influence. And the administrative machine protects its own structure.

The only losers are ordinary taxpayers and public services.

What would actual reform look like? First, federalize funding for tax enforcement to align incentives. Second, mandate that administrative overhead can’t exceed operational staff by more than a set ratio. Third, create salary bands that compete with mid-level private sector positions, not to match top-tier law firm bonuses, but to stop the hemorrhaging of experienced staff.

Most importantly, treat tax enforcement as investment, not cost. Every euro spent on a qualified Steuerfahnder doesn’t disappear, it returns multiples through recovered revenue and, crucially, deterrence. The current system is like refusing to fix a leaky roof because you don’t want to pay the roofer, then wondering why the house is flooding.

Until that changes, Germany will continue operating a tax system where the easiest targets get the most attention, and the most expensive crimes go unpunished. For residents, the practical takeaway is blunt: assume you’re paying more than your fair share, because someone else isn’t paying theirs, and the state has decided that’s acceptable.