At the beginning of last year the German Government introduced ELENA – the Elektronischer Entgeltnachweis.

Put simply, since then employers have had to report information about their employees to a central database, such as how much their earn, the number of days holiday that they took and whether they went on strike.  The form is about three pages long, per employee, per month.

The whole system was criticised for collecting too much data about everyone, without it being strictly necessary.  Under the old system, much of the information was only required when applying for benefits, most notably unemployment benefit, at which point the company had to fill out a form (4 pages long if I remember correctly) about their former employee.

If someone had worked for more than one company within a certain amount of time, then all their previous employers had to fill one out.

With ELENA, the data would be collected month for month, meaning that the unemployment office would be able to access it without bothering or even waiting for the employers.

Except, of course, there were problems.  Who could guarantee that the data would not be used for any other purpose?  How would the unemployment offices be able to access the data of just one person, and only with their permission?

And, of course, it meant a lot more work for every employer every month of the year.

Due to all of these problems and criticism, and new law was introduced to the Bundestag to scrap ELENA.  However having been approved, it still did not make its way onto the German statute book until 3rd December, so between July and November employers have been sending in the data, knowing that it would not be used, but not wanting to risk a fine for not doing so.

So what, you may ask, did the German Government do with all the data that had been collected?

Did they keep it to use in the manner that had been intended?  Or did they delete it?

The answer is: neither!  Instead, they destroyed the encryption key that is needed to access the data.  The data itself is to be deleted over the next few weeks.

Which begs the question: if the key is destroyed, how is the data going to be deleted without wiping the entire database on which it resides?

… and what happens to the backups?

In the financial world Germany has a reputation of having a complex tax system, and even amongst the normal tax payers there is a belief – not unfounded – that Germans pay a lot of tax.

After all, there is a tax on being a member of a Church, a tax to support German re-unification, even a tax on coffee!

But in the end, it is the income tax, or Einkommensteuer, that is most feared.  After all, it is not easy to calculate.  Here we do not have a simple tax band system with a tax-free base income – we have pages worth of tables instead.

What really does not help, is the “cat and mouse” game of trying not have to pay so much tax.  Whereas other country collect less tax in the first place, Germany collects more and then gives you ways to deduct particular expenses occurred from it – at least in part.  There are whole books full of details of what can be deducted to help the taxpayer claim as much back as possible.

These are things like claiming back the cost of getting to work, the cost of learning a foreign language to further your career, or even – if you have the right type of job – how you can recover the cost of playing tennis!

But of course, these books only contain the legal tips on how to save paying so much tax.  These obviously do not go far enough for some high-earners, which is why they opt to take their money abroad.

Which leads me to the current debate about whether Germany should purchase data about the Swiss bank accounts of alleged tax-evaders, evoking memories of a similar case two years ago with data from Lichtenstein.

How much Germany stands to gain from obtaining the data depends on which source you read, most agree that it will be at least €100 million.  But the real debate is about how this data made it out of the banks concerned and which law should therefore prevail.

Obviously if someone has transferred their money out of the country and not declared this on their income tax form, then the state has a valid interest in claiming the unpaid tax.

But on the other hand, Germany has also seen its fair share of Data Protection issues involving major companies, and would itself be none too pleased if data from German banks ended up with a foreign power.

So people are starting to ask whether by buying the data, Germany is supporting data theft in Switzerland, whilst some politicians claim that it would an “obstruction of justice” not to pursue the information that has been offered.

Either way, there are reports of people correcting their tax returns and suddenly paying up to avoid prosecution, so just by announcing the fact that the data is out there may have helped increase Germany’s tax revenue this year!