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Today’s Top Headlines

German Institute Calls For Lower Tax Burden

by Ulrika Lomas,, Brussels

21 April 2017

A new study into the distribution of the tax burden in Germany has found that middle-income taxpayers pay almost half their income in taxes.

The study by the Cologne Institute for Economic Research (IW) shows that in general, those with the broadest shoulders bear the highest burden, with the top 10 percent of households in terms of income contributing almost half of total income tax revenue.

According to the IW, approximately 4.2m taxpayers earn enough to pay the top rate of income tax of 42 percent, while 2.7m do not earn enough income to pay income tax. For those at the lower end of the income spectrum, value-added tax is the "greatest burden," the institute said.

However, while the study found that Germany's income tax system is progressive, with those on high incomes paying a greater proportion of tax than those on low incomes, it argued that there is still room for tax reforms, in particular to lighten the tax load on middle-income earners.

"Irrespective of the type of household, middle-income households must pay almost half of their income in the form of income tax, VAT, and social security contributions," the IW said.

"Lowering the income tax rate especially [for lower earners] would not only have the benefit of relieving the burden on citizens, but it would also improve the incentives to take up a job subject to social insurance or to increase working time," the institute concluded.

TAGS: tax | value added tax (VAT) | insurance | social security | Germany | tax reform | individual income tax

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