Who likes paying taxes? Nobody particularly enjoys seeing part of their salary go to the taxman each month. After all, you worked hard for this money. So, why do we actually pay taxes? Taxes are the main source of income for the state. The state uses tax income, among other things, to pay for things that benefit the common good – such as the construction and maintenance of hospitals, schools, and infrastructure (such as roads), as well as the salaries of police, firefighters, soldiers, etc.
In many European countries, the principle of “progressive taxation” applies, which means that people with higher incomes have to give up a larger share than low-wage earners. But some people find that taxation is generally too high in Europe and even harms our economies. They argue high taxes discourage investment, innovation, and productivity. Is that correct?
What do our readers think? You sent us YOUR questions and comments and we forwarded them to three politicians and a tax expert!
- Katja Hessel is a German politician and has been a member of the Bundestag for the liberal party FDP since 2017 and Parliamentary State Secretary to the Federal Minister of Finance, Christian Lindner, since 2021
- Kira Marie Peter-Hansen is an MEP from the Danish Socialist People’s Party and Vice-Chair of the Subcommittee on Taxation in the European Parliament.
- Reiner Holznagel is the President of the German Taxpayers’ Association and the Vice-President of the Taxpayers Association of Europe
Clearly, we’re simplifying an incredibly complex issue and there are a range of different perspectives from our readers on this question: Carl, for example, thinks that high taxes are bad because they lead to a big state, while Franz thinks that high taxes are necessary to pay for public services.
To get a reaction, we spoke last year to Kira Marie Peter-Hansen. She is an MEP from the Danish People’s Socialist Party and Vice-Chair of the Subcommittee on Taxation in the European Parliament. What would she say?
Well, I don’t think you can say that high taxes either good or bad. I think it depends on what the taxes are used for. And in Denmark, where I’m from, we have a pretty high level of taxes and I think that’s a really great thing because we get free education, free healthcare, and we can invest in the green transition. But, of course, it doesn’t make sense if the high taxes are spent on something that is inefficient.
For another persepective, we forwarded the same question this year to German liberal politician Katja Hessel:
I think it is important above all that taxes must not last cover justice. On the one hand, of course, we need taxes to finance the welfare state and the state in general. On the other hand, we also need an incentive for individuals to contribute and pay taxes. If the state takes too much away from them, i.e. if taxes are too high, I think that’s bad in principle.
But I think it is also very important, and this is what makes the German tax system work, that strong shoulders also pay more. In Germany we have a progressive tax scale. That means that if you earn less, you pay less tax in relative terms. The more income you have, the higher the tax rate. And so I think our tax system is fair and we have to be careful that we have justice, but also that we don’t overburden those who pay a lot of taxes with a tax rate of – including the solidarity surcharge – around 50%. So if the state takes half of what I earn, I don’t think we need to discuss higher taxes.
Next up, we had a comment sent in from Mona: “I would like everyone to have more of a say in what our taxes are used for. If I see the tangible benefits, I’m also more willing to accept higher taxes.”
To get a response to Mona’s comment, we recently put it to Reiner Holznagel, President of the German Taxpayers’ Association and the Vice-President of the Taxpayers Association of Europe. What would he say to Mona?
I think that the tax system should be noticeable. It may be strange for me to say this at first. But we citizens in the Federal Republic of Germany should actually feel that we not only pay taxes, but also how much we are burdened. And sometimes that is no longer the case. Especially when I have young people with me, they don’t even know their individual tax burden. That is one point. That’s why I think it’s right that taxes should also be noticeable. So: How much income tax do I pay? How high is my tax burden on electricity? And so on and so forth. That alone leads to people becoming more concerned with the tax system.
And on the other hand, I also think that we taxpayers should have more influence on what happens with the money. By that I don’t mean the federal government, i.e. that we vote on whether the police, e.g., gets more money or less. But it is really about the smallest administrative unit in our country, namely the municipalities. And we have noticed that in other countries, where this participatory effect takes place, there is also a higher degree of identification with the municipality and the projects – in Switzerland, e.g.. And when citizens can vote on whether a swimming pool should be built and their individual local tax burden increases as a result, that doesn’t always mean that it will be rejected. Many critics say that. No, we see that in Switzerland, projects are also decided on that ultimately contribute to a higher local tax burden. But then that is also okay because the citizens wanted it. It’s a bit like when we buy a car or any other purchase. Then we also decide whether to take the more expensive or less expensive product or, say, go on a longer trip.
In this respect, I think it’s perfectly fine if citizens can also decide on this. On the other hand, and once more Switzerland shows us this, it is also a corrective. I.e., citizens want to know exactly how expensive it will be. They also want to know the operating costs. And that’s why the local decision-makers are being held much more accountable to calculate seriously and carefully. This has been a problem in Germany in recent years. Let me take the Elbphilharmonie in Hamburg as an example. It was initially supposed to cost 77 million euros. In the end it turned out to be almost 800 million. You can see from that: Many projects are underestimated at the beginning and then end up bombastic. Thus: more local citizen participation.
Next up, our reader Imogen is particularly bothered by the fact that large companies use tricks and loopholes to minimise their tax bill while taking advantage of the benefits of the Single Market (for example, headquartering in countries with lower corporate tax rates like Ireland and Luxembourg).
What did MEP Kira Marie Peter-Hansen think when we put this comment to her in 2021?
I think tax competition is one of the biggest threats to my generation. I think it is a big problem that we have a Single Market in the European Union, but then we have tax competition in all of these countries. Something we are working on [in the European Parliament] is the list of tax havens, but we can only have non-EU countries on the list – even though, for example, Luxembourg and Ireland also have lower taxes.
Are high taxes good or bad? Do high taxes have a negative impact on economic growth? Or can high taxes also have positive consequences, such as a strong social system and high living standards? Write us a comment and we will forward it to politicians and experts!
I think taxes are a limitation for a high percentage in Europe nowadays due to the crisis. It is something that must be adapted and controlled not only by the national government but also by the EU.
Otherwise high taxes are a necessity in the country development. Most of the country’s income is taken from the high taxes.
In conclusion, they are a necessary part of the country’s income, but they must be controlled by the national government and the international community.
Good for the Receiver of Revenue but bad for the rest!
We citizens get charged for political governance and services rendered by the State- whether a good or a bad one, necessary or unnecessary, friendly or unfriendly, efficient or inefficient, dedicated or apathetic, promised or dishonoured, convenient or remote etc.
The question to answer: How fair or unfair & just or unjust are taxes applied? Not high, good or bad.
Two basic guidelines:
• The ancient version-
“Therefore, render to Caesar the things that are Caesar’s, and to God the things that are God’s.”
• The modern version: “The User Pays Principle.” More (social) demand on the state creates more costs & bureaucracy – creates higher taxes= an endless spiral!
A Global Tax comparison:
Can the EU supranational budget demand- whether explained as an additional tax or as lost revenue by all 27 Members be judged unfair & unjust?
Eliminating or reducing such tax obligations for the 27 Members could result in a reduction of the individual tax rates from high and bad to bearable & better.
One important principle of any sovereign government remains the consent given by the governed through regular elections, referendums, consultations, or opinion polls to determine its basic responsibilities, priorities, structure & size and apportion costs & savings in a fair & equitable manner.
E.g.: Zero Income tax countries are a burden to just taxation & are hurting all.
The ECHR speaks mainly about rights but hardly any obligations. These rights are controlled by supra-EU law- not Nations via International agreements.
That could be comparable to a 2nd (resurrected) Caesar whose system is on autopilot to elevate itself to ever higher levels. The coming of the supra-Caesar!
Taxes can be at any level almost, it depends on what everyone gets from it as a result is what matters?
Surely if taxes are high and citizens are deprived and the ruling elite are seen as lauding it up then this is a recipe for disaster, but if the tax of the same levels are used to enhance and make life better and society cohesive the everyone will agree to those levels or higher!
The level of tax is irrelevant if it is seen not to be abused or squandered but used for the interest of all, individually or collectively!
There is much written over the centuries on this theme but it’s how we have allowed politicians to manipulate and control the narrative that’s the problem.
Individuals must feel they have a gain and a say in their spaces, without that democracy turns into authoritarian rule!
Taxes are theft.
Europe appears to be taxing for the Ukrainians and Russians to killing each other and ruining their society as well as that of the EU member states.
If European enterprises are collapsing, economies are at the brink of recession, who the government going to tax? When the economy is in prosperity, government revenue would increase without the need to use high tax. As in China, the tax is not high, salary is not high, the country has huge surplus because the country has the all favourable elements to attract foreign investment so as to prosper its enterprises and create huge no. of jobs. With all these profit taxes, the government has returned to the society by investing enormously in all sorts of infrastructure on transportation, education, alleviation of poverty, sponsoring all sorts of top research projects, extension of free education, and medical expenditure for all COVID cases are free…So, all problems can be solved by economic growth not by play politics to cheat the innocent people.
Taxes must be high for the rich and bearable for the middle class. Right now it’s quite the opposite and that’s one of the major economic problems worldwide.
Moderated taxes are the best. They can be high and very high for companies who earn many milioans a month…
Unfortunately, the world doesn’t work by spreadsheets….the higher the tax rate…the less the tax take…..also the more government’s recieve, the more they’ll waste!
High taxes for the rich is good. High taxes for the poor and the middle class and low to no taxes for the rich like in the current regressive system we have is not good at all. If I as an average working person can pay all my taxes, then billionaires have no excuses not to pay taxes.
Too high taxes are not good for those who earn little or even decent incomes…