Germany: A Tax Hell

Why do Russians Want to Join the European Union?

The tax burden on the population in Germany makes up 50-60%. Only very rich people manage to avoid paying taxes. All other people have to pay all of it. Inheritance taxes fall under a complicated classification. They require a payment from seven to fifty percent of an inherited sum. Yet, the law stipulates tax free minimums in case of inheritance. For instance, about 500 thousand euros are paid to a husband or wife whose spouse died, about 250 thousand euros are be paid to children, and between five and fifteen thousand euros are paid to other relatives. Calculations show that if an individual inherits 25 million euros, the state will take almost a half of it.

As is supposed, there will be another law instituted in Germany in the year 2003. According to this law, the cost of private real estate will be re-evaluated. Supposedly, the cost of taxable real estate will increase three or four times.

The government plans to retrieve the previously canceled well-being tax. This is planned “for the sake of the social justice.” Another important factor is the great financial problems that the country is experiencing at present. This issue is actively being discussed on different levels.

There is a land ownership tax in Germany as well. If a person buys a plot of land, it will be requisite to pay a non-recurring tax of 3.5% of the total cost. Then it will be necessary to pay taxes on the land in accordance with a complicated scheme. A rent payment includes the land tax as well.

It should be mentioned here that Germany uses a complicated classification for tax-payers. Any taxes or other payments to the state treasury are conducted based on that classification. The average annual income per capita in Germany makes up 30 thousand euros. Income tax, social insurance, hospital insurance, old age and medical care insurance, pension insurance, and unemployment insurance are mandatory taxes to pay.

According to experts’ estimate, there are more than fifty direct and indirect taxes in Germany. Direct taxes, which are deducted from common people’s wages in Germany, include the church tax and the solidarity tax, which was instituted by western Germans for the sake of the restoration of the former German Democratic Republic’s economy after the unification of the country. Indirect taxes include a value added tax of 16% on all kinds of industrial goods and seven percent on food, tobacco, alcohol, and salt.

As was mentioned above, only rich people in Germany can avoid tax payments. That is why the tax counselor is considered to be one of the most respectable professions in Germany. A person of this profession usually manages to find loopholes to reduce taxes with the help of gaps in tax laws. Any businessman uses a tax counselor’s services on a regular basis. Large industrial enterprises also do their best to avoid paying taxes and social allowances for their personnel. They simply move their factories to other countries. For example, Volkswagen manufactures its cars in the Czech republic (Skoda) and in Spain (SEAT).

Many well-known athletes usually state that their constant place of living is in “another country,” in which the taxes are much lower than in Germany. This is also a way to avoid tax payments. The fiscal police of Germany investigates such cases very carefully. For instance, if a German millionaire lives in Malta as in his permanent residence, he will have no problems with Germany. If the police find out that they were cheated (as with tennis stars Boris Becker and Steffi Graf), there will be criminal proceedings instituted against the “swindlers,” as it is stipulated by the law.

An “average” German citizen resorts to the help of counselors that work for state financial and tax departments. Sometimes. people go to public associations of tax-payers. At times, it is possible to reduce a tax burden by means of “spending” money on medical care or education for children, acquiring equipment for professional activity, and the like.


Translated by Dmitry Sudakov

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