The German cabinet on Wednesday approved a bill to extensively change the country's tax system. However, plans to establish a central electronic databank of taxpayer information, which is part of the bill, have sparked a debate about privacy guidelines.

The federal finance ministry said the electronic databank will lead to less tax fraud and less bureaucracy. The databank will contain all relevant information necessary for calculating income tax. This includes data on spouses, children, religion, as well as tax brackets and exemptions.

Germany's data protection commissioner, Peter Schaar said he did not categorically oppose the electronic databank. Schaar's spokesman, Dietmar Müller, said separately that the extent of the information collected was cause for concern, as it could invite abuse.

"In view of the amount of sensitive data and the possible desire to retrieve it, we see a number of data protection provisions which are still open," Müller said.

Müller pointed out that law enforcement agencies could be particularly interested in certain data. This had been the case, for example, with data from electronic highway tolls, which is now being used to fight terrorism.

Information on religious belief was particularly sensitive, Müller said. The commissioner would therefore seek to press for this information to remain protected. Germany does not have a formal separation of church and state. Church taxes are withdrawn by people's employers and passed on to the authorities.

Employer insight

Opposition politician Hermann Otto Solms of the Free Democratic Party (FDP) said he had fundamental reservations about the databank. He warned of the "total transparency" it enabled.

"A huge, self-contained data pool emerges which isn't necessary for the sole purpose of income tax," said Solms, the fiscal spokesman for the free-market-liberal FDP. He said opening the file not only to tax authorities, but also to employers was a particularly precarious situation.

"It isn't for nothing that in Germany there's fiscal secrecy, which stipulates that only fiscal authorities have the right to access tax data," Solms told the daily Hessische/Niedersächsische Allgemeine on Wednesday. "A huge databank is being created about the working life of each citizen, which isn't protected from outside access."

Citizens need privacy assurances

The government will also introduce a central taxpayer identification number, with lifelong validity. At present, the numbers change according to a person's residence. This had made it easier for people to evade taxes by moving around.

The fiscal spokeswoman from the opposition Green party, Christine Scheel, said the central databank was necessary in order for the new identification numbers to work.

"But citizens must have the confidence that their data will not be drawn on further," Scheel said. The Greens therefore were demanding strict specification of how and by whom the data could be used, she said.