Nominal value principle
In tax law , the nominal value principle states that the numerical value is decisive for all amounts of money (euro = euro). The actual value of the money doesn't matter.
The tax owed or other amounts to be paid are therefore money debts in the form of a sum debt (nominal amount debt ).
The nominal value principle has a negative effect on taxpayers during a period of inflation , as fictitious profits are recorded: the real interest (what is actually earned) is lower than the nominal interest (the amount owed in numbers), so the real fictitious profit is smaller than the nominal Profit. For the tax, however, the nominal interest rate is decisive. This represents an impairment of the performance principle.
In the case of a progressive income tax rate, the nominal value principle also has the effect that inflation increases the actual tax rate (" cold progression "). The nominal income increases and with it the tax rate , but the real income decreases .
