Why tax is a big issue in Germany

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!

Zündwarensteuer

Zündwarensteuer was a tax in Germany applied to “Zündwaren” – things that can make fire.

The tax was originally introduced in 1909 and applied to matches, but in 1919 it was also extended to lighters.

It was discontinued in 1981.

To hear a simple explanation and a short discussion in German, listen to the podcast:

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Zuckersteuer

This podcast also talks about Pfeffersteuer (pepper tax) and Schokoladensteuer (chocolate tax).

Zuckersteuer was a tax in Germany on sugar.  The tax was originally introduced in Prussia in 1841 – one year after the sugar cube was invented.  Sugar had become more popular in previous years following the introduction of the sugar beet.

The tax was discontinued at the end of 1992.

To hear a simple explanation and a short discussion in German, listen to the podcast:

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