The tax burden on wages and salaries in Germany is still high in an international comparison. Taxes and levies weigh on income more than in almost any other industrialized country.
Income taxes and social security contributions account for a high percentage in this country by international comparison. This is the result of an analysis by the Organization for Economic Co-operation and Development (OECD).
Higher taxes and duties only in Belgium
Among the 38 member states, Germany ranks second among the industrialized countries of the OECD after Belgium in terms of taxes and social security contributions on earned income. The average tax rate for a married couple with children is 40.8 percent. Only in Belgium is the burden higher, at 45.5 percent. The average tax burden for all OECD countries is 29.4 percent.
In the OECD analysis, the burden of income taxes and social security contributions from employees and employers are summarized in the tax ratio and compared to gross income.
Low taxes in Switzerland and the USA
Even for single people, Germany is in second place in terms of the burden of taxes and duties. The corresponding rate here is 47.8 percent. Again, only Belgium ranks higher with 53.0 percent as the tax leader. Just behind Germany are France, Austria and Italy. The OECD average for a single household is 34.6 percent. Significantly lower taxes than the OECD average apply to both single people and families with children in Switzerland, Israel, Great Britain and the USA.
“In an international comparison, lower and middle incomes in Germany are subject to relatively high taxes and levies,” commented the head of the OECD Berlin Centre, Nicola Brandt, to the Reuters news agency. “The main reason for this is that the social security systems are essentially financed through social security contributions.”
Good social system in Germany as a counterweight
However, the relatively high taxes would also be offset by direct benefits such as pension entitlements, health insurance and unemployment insurance. In addition, payments such as child benefit and tax benefits such as the employee lump sum or basic and child allowances in Germany are not included in the presentation. If these were taken into account, the burden on families would be just under 20 percent according to calculations by the “Handelsblatt” and thus in the middle of the OECD countries.
Many countries in comparison, such as the USA, Mexico or Greece, have significantly less developed social systems, so employees have to spend more money on their own security.
Nevertheless, according to the OECD report, high taxes and levies on low wages could create false incentives. “It may not be worth working more and taking on better-paying jobs,” says Brandt. The OECD therefore recommends relieving lower wages.