High tax country

A high-tax country ( English high-tax country ) is when the tax rate in a country is well above the average of the tax rates of other countries. The opposite is the low-tax country or the tax haven .

General

The distinction between high tax country and low tax country is necessary because the tax burden in all countries is sometimes very different. This is the result of government tax and economic policy , which in a high-tax country aims to finance the high government quota , the expensive welfare state or high government spending on public goods . However , as part of tax avoidance, taxpayers have the option of choosing their place of residence or business to relocate their tax liability to where the tax burden is lowest. The free movement of persons or freedom of establishment encourage them to choose between competing tax systems . In doing so, they take advantage of the international tax differential , which can lead to tax competition . This can lead to relocations of the seat to the detriment of the high-tax countries and in favor of the low-tax countries, with the result that tax revenues decrease in the high-tax country and increase in the low- tax country. But also by import of goods from a low-tax country ( imported cars go) to the high-tax country tax loss ( VAT ).

Measurement

From which tax or duty rate a state is considered a high-tax country is controversial. In 2005, Uwe Wagschal came to the conclusion that Germany was not exactly the prime example of a high-tax country for companies. “However, taxation is not low. A middle position in corporate taxation appears… realistic ”. The classification also depends on which key figures are used. There are different results depending on whether the nominal or real tax rates , the tax or contribution ratios or tax relief ( depreciation , loss offsetting ), subsidies ( tax subsidies ) or government grants to taxpayers ( child benefit , allowances ) are taken into account.

The Foreign Tax Act (AStG), which came into force in September 1972, provides an important point of reference with its presumption of a low-tax country in reverse from Section 2 (2) No. 1 AStG. According to this, one can speak of a high-tax country if the tax burden for income tax including collectively agreed tax exemptions abroad is more than a third higher than in Germany. The purely income tax reference can also apply to the entire tax revenue .

International statistics

Countries with the highest tax or duty ratio in Europe are considered high-tax countries:

country	Tax rate 2016 in%	Tax rate 2016 in%
Slovenia	22.3	37.0
Luxembourg	26.4	37.1
Germany	23.4	37.6
Norway	24.4	38.0
Greece	27.6	38.6
Netherlands	24.0	38.8
Hungary	25.8	39.4
Austria	27.8	42.7
Italy	29.9	42.9
Sweden	34.5	44.1
Finland	34.1	44.1
Belgium	30.5	44.2
France	28.5	45.3
Denmark	45.9	45.9

Only in the high-tax country of Denmark are the tax and contribution rates identical. The discrepancy between tax and contribution rates is particularly high in Slovenia, Luxembourg, Germany, the Netherlands, Hungary, Austria, Italy, Belgium and France.

The global OECD average in 2016 was a tax rate of 15.3%, which was also exceeded by non-European high-tax countries such as New Zealand with a tax rate of 27.8% or Australia (22.4%). International tax competition can result from these different tax rates.

economic aspects

Already Thomas Robert Malthus wrote in 1821 that the "reduction in taxes a big advantage" is for the living of income taxpayers. In 1936, John Maynard Keynes , in his General Theory of Employment, Interest and Money, warned against excessive taxation of the rich because it would drive them into tax evasion . A trade-off of progressive taxation consists in the fact that above a variable threshold it impairs taxpayers' willingness to perform and can motivate them to tax evasion or tax evasion. Income or wealth millionaires in particular are usually very mobile and relocate abroad.

It is also worth taking advantage of the international tax differential for multinational companies . For example, a group company in the high-tax country can supply intermediate consumption or intermediate goods to a sister company in the low-tax country at artificially low transfer prices (taking into account the arm's length principle ), resulting in excessive profit in the low-tax country and too low a profit in the high-tax country. Conversely, a group company in the high-tax country could purchase intermediate consumption from its sister company in the low-tax country at excessive but permissible prices. As a result, an artificially generated higher profit is achieved in the low-tax country, while the profit is too low in the high-tax country.

The property “high tax country” can be a disadvantage when choosing a location for business start-ups because corporate taxation is an important location factor . According to Alfred Weber (1909), the three location factors transport costs , labor costs and agglomeration advantages influence the choice of location, with transport costs playing a central role in Weber's system. They are the most important factor in determining the optimal location. However, the high-tax country does not necessarily have to be a high-wage country .

A country with an average tax level can become a high-tax country if other countries lower their taxes in the context of tax competition and the country with an average tax level does not make any adjustments .

Individual evidence

1. ↑ Barbara Dehne, Upper and Lower Limits of the Tax Burden in a European Perspective , 2004, p. 157
2. ↑ Norbert Andel (Ed.) / Bernd Genser, Problems of Taxation , Volume 3, 1999, p. 15
3. ↑ Uwe Wagschal, Tax Policy and Tax Reforms in International Comparison , 2005, p. 79
4. ↑ OECD (ed.), Revenue Statistics 1965-2016 , Paris, 2017
5. ↑ Thomas Robert Malthus, On the Causes of the Current Trading Blockage , 1821, p. 43
6. ^ John Maynard Keynes, General Theory of Employment, Interest, and Money , 1936, p. 314
7. ↑ Thomas Meyer, Theory of Social Democracy , 2005, p. 335
8. ↑ Steffen Ganghof, Tax Competition , in: Fritz W. Scharpf / Vivien A. Schmidt (Eds.), Welfare and Work in the Open Economy vol. II, 2000, p. 601
9. ↑ Lorenz Jarass / Gustav M. Obermair, Fair and efficient corporate taxation , 2015, p. 118
10. ↑ Alfred Weber, On the location of industries , first part: Pure theory of location , 1909, p. 16 ff.