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The tax burden on the population in Germany makes up 50-60%. Only very rich people manage to avoid tax payments. All other people have to pay all of it. Inheritance taxes stipulate a complicated classification. They provide a payment from seven to fifty percent of an inherited sum. Yet, the law stipulates tax free minimums in case of inheritance. For instance, about 500 thousand euros will be paid to a husband or wife, whose spouse died, about 250 thousand euros will be paid to children, and between five and fifteen thousand euros – to other relatives. Calculations show that if an individual inherits the sum of 25 million euros, the state will take almost a half of it to its treasury.
As it is supposed, there will be another law instituted in Germany in the year 2003. According to this law, the private property real estate cost will have to be re-evaluated. Supposedly, the cost of the taxable real estate will increase three or four times.
The government plans to retrieve the previously canceled well-being tax. This is planned to be done “for the sake of the social justice.” Another important factor for that is great financial problems that the country experiences at present. This issue is actively discussed on different levels now.
There is a land ownership tax in Germany too. If a person buys a plot of land, it will be requisite to pay a non-recurring tax in the sum of 3.5% of the total cost. Then it will be necessary to pay taxes for that land in accordance with a complicated scheme. A rent payment includes the land tax as well.
It should be mentioned here that Germany uses a complicated classification of tax-payers. Any taxes or other payments to the state treasury are conducted on the ground of that classification. The average annual income per capita in Germany makes up the gross of 30 thousand euro. Income tax, social insurance, hospital insurance, old age or sickness medical care insurance, pension insurance, unemployment insurance are mandatory taxes to pay.
According to experts’ estimate, there are more than fifty direct and indirect taxes in Germany. Direct taxes, which are deducted from common people’s wages in Germany, include the church tax and the solidary tax, which was instituted for western Germans for the sake of the restoration of the former German Democratic Republic’s economy after the unification of the country. Indirect taxes include value added tax in the sum of 16% on all kinds of industrial goods and seven percent on food, tobacco, alcohol and salt.
Like it was mentioned above, only rich people of Germany can avoid tax payments. That is why, a tax counselor is considered to be one of the most respectable professions in Germany. A person of this profession usually manages to find some ways out to reduce taxes with the help of tax law gaps. Any businessman uses tax counselor’s services on a regular basis. Large industrial enterprises also do their best to avoid high taxes and social allowances for their personnel. They simply move their production to other countries. For example, Volkswagen manufactures its cars in he Czech republic (Skoda) and in Spain (SEAT).
A lot of well-known athletes usually state that their constant place of living is “another country,” in which a taxation level is a lot lower than it is in Germany. This is also a way to deviate tax payments. The fiscal police of Germany investigate such occasions very carefully. For instance, if a German millionaire lives in Malta as in his permanent residence, he will have no problems with Germany. If the police find out that they were cheated (like it happened with tennis stars Boris Becker and Steffi Graf), there will be criminal proceedings instituted against “swindlers” as it is stipulated by the law.
An “average” German citizen resorts to the help of the counselors that work for state financial and tax departments. Sometimes people go to public associations of tax-payers. At times, it is possible to reduce a tax burden by means of “spending” money on medical care or education for children, acquiring equipment for professional activity and the like.
Translated by Dmitry Sudakov