CONTINUEThis site uses cookies. By continuing to browse this site you are agreeing to our use of cookies. Find out more.
  1. Front Page
  2. News By Topic
  3. German Think Tank Advocates Job-Boosting Tax Reform

German Think Tank Advocates Job-Boosting Tax Reform

by Ulrika Lomas, Tax-News.com, Brussels

25 July 2012


The German Institute for the Study of Labour (IZA) in Bonn has recently unveiled details of its concept for a simple, efficient and fair tax system, which will serve to create around half a million jobs in Germany.

In its report, the institute maintains that its plans for a radical reform of taxation will simplify existing tax rates and reduce income inequality without increasing state debt.

The key element of the IZA’s concept are plans to integrate regressive social insurance contributions into the progressive system of income tax, meaning that social insurance levies and income tax are no longer levied separately, and that there is consequently only one payment to be made to the state.

An integrated system of income tax would not only finance the country’s social security system but also other state services, including investment in education and infrastructure, it is argued.

The IZA has advocated that a progressive tax scale be introduced, taking into account both social insurance contributions and the country’s solidarity levy, suggesting that a 40% tax rate apply to annual income of between EUR30,00 (USD36,000) to EUR40,000, a 50% tax rate apply to annual income of between EUR40,000 to EUR60,000, and a 60% top rate of income tax apply to annual income in excess of EUR60,000.

According to the IZA, the new transparent system would reduce the burden above all on low- and middle-income earners in Germany, while increasing the fiscal burden on the top 10% of earners.

Defending the institute’s recommendation, Hilmar Schneider, director of labour market policy at the IZA insisted that the integration of social levies into the income tax system would lead in the medium-term to less bureaucracy and therefore to cost savings, which should in turn be used to reduce state debt.

The institute highlights the fact that its proposal will have a considerable effect on the labour market, leading to the creation of an estimated half a million new jobs. Highly qualified women will have a significantly greater incentive to work, the institute says, alluding to the looming shortage of skilled workers in Germany.

TAGS: tax | tax rates | social security | Germany | tax reform | individual income tax | services

To see today's news, click here.

 















Tax-News Reviews

Cyprus Review

A review and forecast of Cyprus's international business, legal and investment climate.

Visit Cyprus Review »

Malta Review

A review and forecast of Malta's international business, legal and investment climate.

Visit Malta Review »

Jersey Review

A review and forecast of Jersey's international business, legal and investment climate.

Visit Jersey Review »

Budget Review

A review of the latest budget news and government financial statements from around the world.

Visit Budget Review »



Stay Updated

Please enter your email address to join the Tax-News.com mailing list. View previous newsletters.

By subscribing to our newsletter service, you agree to our Terms and Conditions and Privacy Policy.


To manage your mailing list preferences, please click here »