Germany’s massive tax code may soon get a face-lift. The opposition Christian Democratic Union recently proposed scrapping the loopholes in the income-tax system and in return, it wants to cut taxes to three simple rates: 12, 24 and 36 percent. (The top bracket now stands at 45 percent.) The Free Democrats, traditionally Germany’s most liberal party, submitted a similar bill to Parliament.
One factor driving reform, says the Wall Street Journal, is competition.
Another motivator, notes the Journal, is Germany’s unhappy experience with tax gimmicks intended to stir investments into enterprises the state has deemed “worthy” – as evidenced by the vast tracts of empty commercial space and housing in the eastern states:
The lesson around the world is that high rates breed tax loopholes that in turn benefit mainly the wealthy who can afford to hire the lawyers to exploit them. If flat tax reform can happen in Germany, it can happen anywhere, says the Journal.
Source: Editorial, The Taxman Goeth, Wall Street Journal, January 19, 2004.
For text (WSJ subscription required)
http://online.wsj.com/article/0,,SB107447166150804807,00.html
For more on Flat Tax
http://www.ncpa.org/iss/tax/
FMF Policy Bulletin/ 20 January 2004
