NCPA - National Center for Policy Analysis

Germany: High Taxes, Sluggish Economy

October 31, 1995

Among all countries in the Organization for Economic Cooperation and Development (OECD), Germany has the fifth heaviest tax burden. So growth forecasts are being revised downward, unemployment remains high and tax evasion and capital flight to other countries are growing problems.

  • German workers paid 36.6% of their income in taxes in 1993.
  • Total taxes as a share of gross domestic product reached 39.2% in 1994.
  • Among major countries, German workers are the most heavily taxed - with Italy second at a rate 40% below Germany.
  • The top German tax rate is 53%.
  • At 58.95%, the top corporate tax rate on undistributed profits is by far the highest of any OECD country.

So Germans are responding by investing abroad. In the first six months of this year, German investment abroad doubled - to about 28.2 billion marks - when compared with the same period last year.

Unless action is taken soon, Germany may find its best and brightest people leaving for greener pastures, just as German capital is already taking flight.

Source: Bruce Bartlett (National Center for Policy Analysis), "Steffi's Not the Only German With Tax Woes," Wall Street Journal, October 31, 1995.


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