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!

Web tracking and privacy

About 14 years ago I had e-mail contact with Tim Berners-Lee – the man who had just created a thing called the World-Wide-Web. I was a student, and he was an internet pioneer. At the time, we both used the same type of PDA!

Today there is an interview with him on BBC News with a Q&A, on topics not unlike I get asked about myself.

So what’s my view on internet privacy?

Well, living in Germany we have fairly strict laws on such things. You can’t just have your e-mail address added to a mailing list – you have to give permission and it’s up to the owner of the list to prove that you gave it. Cold calling private households is illegal as well.

Over the years I’ve become a defender of such rights. I blog about unwanted e-mails and telephone calls and often try to follow how my personal data has got from one system to another.

And yet I am just as fascinated when sites such as Amazon recommend me items based on previous purchases, much in the same way I recommend products to my own customers.

Except of course, my recommendations are based on my knowledge of peoples’ requirements – Amazon does it automatically based on the data that they have saved about me.

There are many systems on the internet that are free to use for personal use, provided you accept their advertising, such as my favourite virus scanner.

But what would happen if my provider allowed me a discount for being allowed to process the web sites that I visited – or worse, made me pay a surcharge for not doing it?

In the case of a discount, I would have to think long and hard about it. I would certainly try to avoid any surcharge.

But being in Germany I hope that, like so many other things, such systems will have to be “opt-in” so that I won’t suddenly find myself viewing advertisements based on where I surfed to yesterday.

Sometimes having such strict privacy laws can be useful.

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