February 2003 - Nr. 2
German Tax Ratio Lowest in Europe
TWIG - The tax burden on Germans is, compared with that of other nations, not nearly as high as widely supposed. This is according to a study conducted by the Organization for Economic Cooperation and Development (OECD), figures from which were released by the German Finance Ministry this week. The study shows that in 2001 the tax ratio, that is, the ratio of tax revenues to gross domestic product, in the Federal Republic was 21.7%. This was not only the lowest tax ratio in Europe, but anywhere in the world, save Japan, which has a 17.2% ratio; the tax ratio in the U.S. is slightly higher, at 22.7%.
Although Germany fares less well when hefty social security contributions are factored in, its total taxation ratio, including social security contributions, 36.4%, is still less than that of Italy, France or the UK. The nation with the highest total tax ratio is Sweden, at 53.2%. The U.S. and Japan have markedly lower total ratios, at 29.6% and 27.1%, respectively.
In presenting these findings this week, German finance minister Hans Eichel said that the misperception of Germany as a high-tax nation is based solely on the nation’s social security contribution rates. He said the reform of Germany’s social security system must be "the central task of German policy in the current legislative period." He noted that progress had already been made, citing tax benefits for families in Germany that no other country offers. He also reiterated that taxes would be lowered substantially in 2004 and 2005, by roughly 23 billion euros in total.
