Germany has the second-highest tax burden among the 38 member states of the Organisation for Economic Co-operation and Development (OECD), with one of the main reasons being the expensive social system. According to a new study by the OECD, a married couple with children must pay an average of 40.8% of their income in taxes and social security contributions. Only Belgium has a higher burden at 45.5%. The average tax burden for the 38 industrialized countries is 29.4%. For single households, Germany ranks second with a tax rate of 47.8%, surpassed only by Belgium at 53.0%. France, Austria, and Italy follow Germany in the ranking. Countries such as Switzerland, Israel, the United Kingdom, and the United States have significantly lower tax burdens for both single individuals and families with children.
The head of the OECD Berlin Centre, Nicola Brandt, attributes the high tax burden in Germany mainly to the social system. Lower and middle incomes in Germany are subject to relatively high taxes and social security contributions compared to other countries, as social security systems are primarily financed through social security contributions. However, direct benefits such as entitlements to pensions, health insurance, and unemployment insurance also offset the relatively high taxes in Germany. Transfer payments such as child benefit and tax breaks such as the employee lump sum or basic and child allowances are not taken into account in the presentation. Including these factors, families have a burden of about 20%, which corresponds to a middle position in the OECD comparison.
The high tax burden can lead to disincentives, according to Brandt. “Under certain circumstances, it may not be worth working more and accepting better-paid positions.” The economist emphasizes that environmental and property taxes in Germany are not particularly high compared to other countries. In addition, there are generous exemptions from inheritance and capital gains taxes to some extent. Therefore, Brandt sees opportunities for “revenue-neutral reforms in the area of tax and transfer design,” which could particularly relieve lower incomes. The OECD has already recommended such reforms several times.
