BERLIN: German Finance Minister Wolfgang Schaeuble is in favor of lowering income tax for workers and raising a relatively modest tax on investment income after next year’s federal election, he said in an interview published here the other day.
Germany has a flat rate withholding tax of 25 percent on private income from capital and capital gains. It was introduced by former SPD Finance Minister Peer Steinbrueck with the aim of preventing tax evasion.
Critics say the so-called settlement tax is unfair because it favors the wealthy and punishes the working class. German employees’ salaries are taxed at a progressive rate of up to 45 percent.
“I was never a friend of the settlement tax,” Schaeuble told German newspaper Frankfurter Allgemeine Sonntagszeitung. “But my predecessor Peer Steinbrueck was right when he justified it back then by saying: It’s better to have 25 percent of something than 45 percent of nothing.”
Schaeuble said the taxation of capital income was difficult in a globalized world in which people can hide their wealth in secret bank accounts in other countries.
But he added the government was working on realizing an automatic exchange of bank account information between all countries and establishing a register to detail the beneficial owners of companies, trusts, foundations and shell companies.
“That’s not an easy task technically, but we’re getting there,” Schaeuble said, adding Berlin could then abolish the flat rate withholding tax and tax capital gains at the same rate as salaries.
“Then, during the next legislative period, we could even think about lowering the overall income tax rate,” Schaeuble said.
