After the German government decided in April to provide one billion euros in military aid to Ukraine, critical voices were raised, especially from the opposition. On April 16, 2022 the deputy federal spokesperson of the right-wing party “Alternative für Deutschland” (AfD) Georg Pazderski wrote on Twitter: “It is not Scholz who is providing more than one billion euros in military aid to Ukraine. It’s German taxpayers, who already have the highest tax and contribution burden in the world.” We have checked his claim and rate it as mostly false.
In April 2021, the newspaper “Handelsblatt” described Germany as the country with the highest taxes and contributions. The statements were based on the annual statistics of the Organisation for Economic Cooperation and Development (OECD). According to these statistics, in no other country do single employees pay as many taxes and social security contributions as in Germany. On average, 38.9 per cent of gross salary is spent on income tax and social security contributions, 0.5 per cent more than in Belgium, which takes second place on the list. Germany achieves a better ranking for families with two children. Single-earner families pay just under 20 per cent in taxes and social security contributions, which is less than in the Netherlands, Denmark and Finland. For two earners, 29.9 per cent is deducted from wages. Here, Germany is again significantly worse off, only Belgium is higher in the list with 30.5 per cent.
Summarising these results, Germany indeed seems to be one of the most expensive countries, especially for singles and dual-income families. On the other hand, it will look different, if the overall economic tax burden is placed in relation to gross domestic product (GDP). In 2019 Germany, with 38.8 per cent of GDP, was ranked 12th out of the 38 OECD countries – above the OECD average of 33.4 per cent, but clearly behind other western European countries like Denmark with 46.3 per cent or France with 45.5 per cent.
However, these comparisons are flawed by the fact that in Germany social security contributions are organised by the state. This results in comparatively high social security contributions, which significantly increase the total tax burden. In other countries, such as the USA, the social system is organised privately. This means: fewer contributions, but also fewer state social benefits. If this information is taken into account, i.e. only the tax contributions are compared, Germany is below average. However, the values must also be viewed in a more differentiated way. According to the list, the Scandinavian countries have a very high tax burden, although they receive their health benefits partly through taxes. In a comparison with Austria, which organises its social system like Germany, Germany scores better.
The OECD report also leaves out indirect taxes such as value-added tax or other taxes on consumer goods. In the comparison of value-added tax, Germany, with 19 per cent as the standard rate, is clearly further behind in comparison to other European countries. Hungary is in first place with 27 per cent.
Conclusion
The OECD focuses its figures on standard deductions such as the basic tax-free allowance or the child tax-free allowance. In addition, there are many other deductions in Germany. For example, the commuter allowance, professional training and travel expenses, childcare or maintenance payments which can be deducted for tax purposes. It can thus be seen that the entire issue is clearly more complex and must be considered in a differentiated manner. Only if all state benefits and tax charges are taken into account the figures of the countries can be compared. However, the different financing systems are making the analysis very difficult. Nevertheless, in an overall economic comparison it is wrong to describe Germany as a high-tax country. Only singles pay more income tax and social security contributions in Germany than in any other OECD country. Therefore the claim of the deputy federal spokesperson of the right-wing party AfD ist mostly wrong.
RESEARCH | ARTICLE: Sarah Liebers and Berenice Fengler, Hochschule der Medien, Stuttgart (Germany)
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