Low-income taxpayers in particular rarely file a tax return. That often costs them money.
(Photo: dpa)
Berlin Many taxpayers subconsciously forego a lot of money every year. Because of the German system of voluntary tax returns, you miss out on significant reimbursements – most recently in the amount of almost one billion euros. The so-called non-assessment particularly harms low-wage earners.
This is the result of two researchers from the Ludwig Maximilians University of Munich: Tobias Hauck and Luisa Wallossek have specifically calculated the effects of non-assessment.
Behind this is the fact that dependent employees in Germany can forego filing a tax return if they have no further income and are not receiving any income replacement benefits such as parental allowance. The German Income Tax Act allows this, as employers automatically pay wage tax for employees.
According to data from the Federal Statistical Office, around 30 percent of all taxpayers in this country decide not to submit a tax return.
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A problem that the economists are now pointing out: the non-assessment means that taxpayers pay significantly more income tax than the income tax rate provides.
Many do not know that they are paying too high taxes
“It can be assumed that those who are not assessed are often not aware of the excess,” says a report by Hauck and Wallossek, which is available to the Handelsblatt.
Specifically, the researchers evaluated the wage and income tax statistics from 2014. This is therefore the most up-to-date micro-data set on taxpayers in Germany. They calculated the collective wage tax and compared it with the effective wage tax actually withheld.
The so-called non-assessment is particularly harmful to low-income earners.
(Photo: obs)
“The comparison shows: Non-assessed taxpayers paid a total of at least 949 million euros (an average of 119 euros per capita) too much income tax in 2014 because the income tax deduction leads to withheld”, the report says. If only cases with excess, i.e. with too much income tax paid, were taken into account, the sum would even amount to 360 euros per person.
The difference between effective and collectively agreed taxation is particularly pronounced in the lowest income brackets.
The researchers calculate: Below the basic tax-free amount, which in 2014 corresponds to a gross wage of just under 11,000 euros for single taxpayers, the collectively agreed wage tax is zero. In fact, those who have not been assessed pay an average of two percent wage tax. If only those who pay too much wage tax were taken into account, the effective average tax rate would even be around five percent.
Low-wage earners pay extra often
“The system of voluntary tax returns means that low-income people in particular actually pay more taxes than the Income Tax Act defines for their income,” write the two economists. “As a result, effective income taxation is less progressive than the tax rate provides.”
Taxpayers who do not submit a tax return do not always suffer a financial disadvantage: the automatic wage tax withholding works well “for the majority of those who have not been assessed”, according to the report. But there are also “moderate” (up to 100 euros) or “strong” (100 euros and more) differences between withheld and collectively agreed wage tax.
According to the calculations, more than one million non-assessed taxpayers pay wage tax below the basic allowance. The economists describe the excessive taxation of non-assessed as an “undesirable side effect of the optional assessment”.
Treasury should refund automatically
They consider the effective taxation at the lower end of the income distribution to be relevant “from a distribution policy, but also from a legal perspective” and refer to a ruling by the Federal Constitutional Court from 1992. This says: Income taxation below a basic living allowance is unconstitutional. The current system of voluntary tax returns violates this maxim.
Hauck and Wallossek therefore recommend an automatic income tax refund. They assume that the financial administrations of the federal states already have “necessary information” at their disposal in order to be able to fully automatically reimburse dependent employees for the taxes they have paid too much.
Should automated reimbursements not be legally or administratively possible, the tax authorities could at least inform the employees about overpaid wage tax.
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