Climate Foundation comments on suspicion of tax evasion

Posted on May 25, 2022


Climate Foundation comments on suspicion of tax evasion

Dispute over the “Climate Foundation” in Mecklenburg-Western Pomerania

BY ULRICH THIELE on May 25, 2022

In April, Cicero reported that the MV Climate and Environmental Protection Foundation still hasn’t paid a gift tax a year after receiving the €20 million endowment from Nord Stream 2. The so-called climate foundation is not officially recognized as a charitable foundation and should therefore not receive the tax breaks of a charitable foundation – in its statute it only prescribes goals for the common good. For the 20 million euros from Nord Stream 2, the tax would even be at the top tax rate of 50 percent.

After Cicero expressed the suspicion that the foundation might not have submitted its tax return on time, circles within the foundation told Cicero that the gift tax returns had been submitted on time last year – and a reason why the Gazprom endowment was exempt from the gift tax should be freed. Since the money from the Gazprom subsidiary Nord Stream 2 only benefits the common good-oriented climate protection foundation and not the business operations, the reason given is that it should be assessed in terms of tax law in a similar way to an officially non-profit foundation.

Did the tax office lose the tax returns?

At some point, probably in 2021, the responsible Ribnitz-Damgarten tax office allegedly said when asked that the tax returns had both been lost, whereupon the foundation submitted copies later. In the spring of 2022, the tax office is said to have announced the receipt of a positive decision for the week from March 28 to April 3, which exempts the foundation from gift tax. When this did not come, the foundation asked and was informed that Finance Minister Heiko Geue had “his hand on the matter” and would withhold the positive decision in order to harm Sellering, who was at odds with the state government.

Finance Minister Geue dismissed the accusations: “No, that’s not the case,” he said when asked by Cicero .

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Now the foundation has commented in a press release on the “unfounded allegations of tax evasion”. Due to a small inquiry from the Greens, the tax office approached the foundation board and asked whether the foundation would give its approval for exemption from tax secrecy. “We answered the question from the tax office in the negative. The questions asked by the deputies primarily relate to assessments and decisions by the tax authorities, which – incomprehensibly for us – have not yet been made. A decision is still pending months later. However, we do not want to give any approval before we have been able to read and check the decision ourselves,” says the foundation.

According to experts, the foundation is taxable

However, in order to avoid further speculation, the Treasury Department was given clearance from tax secrecy to announce the following:

The donations from Nord Stream 2 AG in the amount of 20 million euros, intended exclusively and expressly for the purpose of climate and environmental protection, were reported to the tax office by the foundation at an early stage. The foundation has submitted an application for exemption from gift tax. The responsible tax office has assigned a tax number. The tax case is being processed.

The sentence is remarkable. The insertion that the 20 million are “exclusively and expressly intended for the foundation’s purpose of climate and environmental protection” gives the impression that the Ministry of Finance shares Erwin Sellering’s thesis on the tax exemption. The chairman of the foundation still assumes that his foundation will be exempt from tax because the 20 million euros serve a public purpose. The Federal Association of German Foundations sees it differently: According to it, foundations “under private law” to which assets are transferred must always pay gift tax – the Climate Foundation is officially such a foundation under private law. A well-known tax consultant and professor of tax law also gave to Ciceroin April that the justification for the tax exemption was legally incorrect and that the foundation was subject to tax.

What about the ominous tax number?

The foundation also announces that it has “requested the Treasury Department to explain the delays and to make a decision as soon as possible, setting a deadline”. Last week, the Ministry of Finance replied to Cicero when asked whether it found the above-average length of the examination of around one year unusual: “The processing periods in gift tax matters can vary significantly in individual cases. Average audit periods are not collected by the Ministry of Finance in gift tax matters.”

The question of the tax number is also interesting in this context. According to the statement from the Ministry of Finance published by the foundation, a tax number was assigned by the responsible tax office. In mid-April, however, Cicero had indications that the competent Ribnitz-Damgarten tax office did not have a separate gift tax number, only a file number for the gift tax application – although the facts had been checked according to the information.

The question of whether the foundation should really be exempt from tax and whether there is a valid tax basis for this in this case becomes exciting. If it also turns out that the Ministry of Finance has actually stopped a positive tax assessment, as sources in the foundation say, that would not only be a possibly questionable intervention in a tax audit. It would also mean that Treasury Secretary Geue lied to Cicero . A question from the small question from the Greens is dedicated to this accusation. An answer is still pending. Of course, the presumption of innocence applies.

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