Thursday, February 21, 2008
This is the inevitable path of a country that has huge unfunded retirement promises, massive social benefits and an aging population that has not been replacing itself. (US: Check, Check, half-check)
Chancellor Angela Merkel has failed to fulfill a campaign promise to simplify the tax code and reduce tax avoidance. Germans evade about 30 billion euros in taxes every year, estimated Dieter Ondracek, head of the German tax collectors' union DStG. That's more than 6 percent of the 495.3 billion euros of taxes collected at all levels of government last year.
``Unfortunately, tax evasion has become a popular sport in Germany,'' Ondracek said Feb. 19 in an interview with Bloomberg Television in Berlin.
Germany last year increased its top income tax rate to 45 percent, ranking it eighth among the 27 European Union nations. Capital gains taxes of as much as 50 percent are also among the highest in Europe.
Zumwinkel is one of several hundred wealthy Germans under investigation for illegally funneling money to foundations in the principality of Liechtenstein to avoid taxes. The inquiries will uncover more well-known individuals in business, politics and sports, the Handelsblatt newspaper reported today, citing unidentified investigators.
People of more modest means can find loopholes in books such as ``1,000 Legal Tax Tricks'' by Franz Konz, who's helped Germans cut their tax bills for 20 years. His book, published last year by Droener/Knaur, is the bestselling tax volume on Amazon.com's German language site.
Part of the issue is that German tax laws have become increasingly complicated as politicians added more and more exemptions. Since German reunification in 1990, the number of tax advisers in the country has jumped 60 percent to 72,669, according to the latest statistics from the BStBK tax advisers' federation.
Unfortunately, an expensive Christmas tree full of "refundable tax credits"...[sorry, I threw up a little].. is just the beginning.
Oddly enough, I've got a serious comment up at my blog here:
The real problem with tax evasion is that when taxes are punitive, as they are in Germany - where government waste puts the US to shame - that tax evasion is the natural response: while there will always be tax avoiders, high tax rates result in avoidance...