Everything the state takes away from us citizens in material terms is tax. It is the most comprehensive state intervention.
In a social market economy, the tax system must be fair. Under no circumstances must it undermine the foundations of the economy and its ability to compete internationally. At the same time, it must help the needy.
With an income of € 3529 net per month, an individual is already among the top ten percent of the wealthiest Germans. An individual earning more than € 4800 gross per month is already considered “rich” under the tax law and pays the maximum tax rate of 42 percent. Is that socially just? The wealthiest 10 per cent of Germans pay more than 50 per cent of the income tax of over € 300 billion, the Institute of the German Economy has calculated. 20 million pay no income tax at all, including 7 million pensioners. This means that the tax burden is being redistributed by the billions from the top to the bottom on a daily basis. The rich already pay around five times as much as the poorer half. Nobody talks or reports about it.
What exactly is “fair taxation”?
A simple calculation example: A citizen earning € 100,000 a year and paying 40 per cent tax on it gives the state € 40,000. If, on the other hand, someone earns only € 10,000, it would be only € 4,000 at the same tax rate. In reality, with such little income you pay considerably less tax or no tax at all. So, if you earn ten times as much, you pay ten times as much tax at the same rate. That would be a fair taxation. In reality, the rich pay several times as much because they are taxed more heavily, and millions of people pay nothing at all- is that ‚fair‘?
Nevertheless, the taxation issue has spurred an ideological and leftist campaign simply clouding this mathematical logic. “The rich should pay more”, the leftist propaganda keeps demanding. But the wealthy already pay much more than the poor.
The tax system is also far too complicated and non-trans- parent. In many countries there are 20 000 rules. The tax system resembles a confusing, incomprehensible and ultima- tely undemocratic jungle.
Wealthy people can save taxes with thousands of exemptions and loopholes. Is that fair? Which average worker can afford a tax consultant? Who can invest as a student and thus save taxes?
The complicated tax rules are totally unfair. Every citizen should be able to see without difficulty what he or she is paying the state. That is the imperative of democracy and transparency under the rule of law. The calculation of today’s over-complicated tax returns must be simple and comprehen- sible. Citizens should be able to calculate everything in a few minutes and submit it online to the tax office. Feedback in a few days instead of months ought to be feasible.
The tax system must be simplified and also leave more money in the pockets of citizens as an expression of their human dignity and freedom. Clarity, simplicity and low taxes in the interest of financial freedom are a state duty, not a gift from politicians. Consequently, we should adopt simple tax systems that have proved their worth in other countries.
The government ratio, including indirect taxes such as VAT, should never exceed the 50 percent mark for all types of taxes. With 19 per cent VAT, this would result in a maximum tax rate of up to 30 per cent. A flat rate of 20 increasing to a maximum of 25 percent should be the goal of a major tax reform.
Proposals:
- A fairer and transparent major tax reform is needed. Modelled on the Estonian example – digitally well organised and simply designed. In Estonia you can file your tax return online. The basis is a computer-readable ID card. The 1.3 million citizens register in the tax authority’s centralised internet portal. There the tax return is submitted via computer within an average of three to five minutes. Applicants sign digitally. The required data, including deductible costs, are sent directly from the employer and the banks to the tax office. Repayments are made within one week. Citizens are satisfied and tax honesty is high. The state saves 750 tax officials. The income tax rate is only 20 percent. Corporate taxes are low. Reinvested profits are not taxed at all. Estonia has the most competitive tax system of all 34 OECD countries.
- A flat rate of 20 percent and simple rules create financial freedom and more happiness for citizens.