I am sure that many of you readers of Tax-Free Today follow us mostly because one day you got fed up with the tax system in your home country. Be it the penalties, the numerous rules, or the taxes themselves.

It is not our intention to decide which are the toughest and most suffocating tax authorities in the world – I am sure that for everyone the tax authorities in their own country are the worst – but we would like to show you an example of what they can become.

The German state is one of the greediest in the world, and the tax burden there sometimes breaks all world records: according to the OECD, Germany was the country with the highest tax burden among the most developed countries in 2020.

In this article, we will look at the 41 most common taxes or levies in Germany. Social security is left out, but it should not be forgotten, as in many cases, it accounts for a fifth or a quarter of what you earn (and 80% of that goes to the pyramid scheme that is state pensions).

Be that as it may, we hope this will make you see how far the state can go if you let it. Of course, it will also leave you wondering about the taxes you are paying now, because, depending on where you live, you are probably paying at least half or three-quarters of the taxes we are going to expose.

You will see that many everyday things are double, and triple taxed without you even realising it, a bit like walking into the corner shop and being charged for a piece of cheese once when you get it, once when you go through the checkout and once when you walk out the door.

To begin with, a short explanation of how the German tax system works: in Germany, both the federal government and the Länder (the different regions) and municipal governments can levy or abolish taxes (which is rarely the case).

In the case of customs and fiscal monopolies, only the federal government has the right to levy taxes through them. In other cases, both the federal and Länder governments have the right to collect them.

The Federal Republic of Germany has the privilege to collect taxes, and this revenue accrues to it in whole or in part (the distribution of tax revenues is explained in a little more detail in the next section). The individual Länder can levy taxes if the federal government does not exercise its prerogative, and they also have the privilege to determine the rate of property transfer tax. This legislative competence is regulated in the German constitution.

After the armed robbery, the federal, Länder and municipal governments share the spoils. Revenues from some taxes go exclusively to the federal government, others to the Länder or municipalities, and still others are distributed equally among the three thieves.

For example, motor vehicle tax revenues go exclusively to the federal government, while income tax and sales tax revenues are distributed among the federal government, the Länder and the municipalities. This revenue competence is regulated in Article 106 of the Basic Law.

The organisations responsible for tax administration are just as important. In Germany, everyone has heard of the tax offices at some point in their lives, but these tax offices are only one of the many state tax authorities that administer most German taxes, i.e., where the taxpayer has to file them.

In addition to the state tax authorities, there are also federal and municipal tax authorities. Each of these authorities is responsible for the administration of various taxes. This administrative competence is laid down in the German constitution.

But well, now that we are done with the boring theory, let’s get down to the painful practice, let’s get to know the taxes one by one.

If, after reading this, you still feel like paying taxes and contributing to this wastefulness, we can’t help you much.

Something to mention before we begin: it is important to bear in mind that all the tax collection figures mentioned in each case correspond to the pre-COVID era. If there is one thing that is clear these days, it is that more and higher taxes are on the way.

Be that as it may, Tax-Free Today will continue to help you legally reduce your tax burden to zero, whether you live in Germany, Spain, Argentina, Mexico or any other country in the world.

1. Capital Gains Tax

Legislative competence: federal government

Revenue competence: Federal and Länder governments

Administrative competence: Länder

Tax burden: 25%.

This tax is especially important for all those who earn money with any kind of financial product: shares, funds, interest… everything is covered by this tax. It is a form of income tax. The debtor (broker, bank etc.) pays it directly to the state when he pays the profit to the person concerned. Only capital gains generated by the private sector are subject to this tax. Gains from business or other investments must be declared separately for income tax purposes. There is a basic ceiling below which this capital gains tax does not apply, and the same applies to pension savings schemes in the savings phase (Riester and Rürup pensions). There is a reduction within the framework of the marital division (see income tax). Losses in this area can only be offset under certain conditions.

Prior to the 2008 corporate income tax reform, which came into force in 2009, capital gains were taxed by a capital gains tax and interest income tax. The Länder administer the tax, with revenues flowing into the coffers of each Land and the federal government.

The media often complains about how unfair it seems to them that capital gains are taxed less than wages, but the truth is that they are quite wrong.

For one thing, the capital that is invested is something on which taxes have already been paid when it is earned. That is, the person who invests in the stock market or crypto or wherever has first earned that money through their work and paid taxes on it.

On the other hand, although the maximum income tax rate is 45% in Germany, there are different tax rates (as well as a minimum tax exemption), and most Germans pay lower tax rates, even as low as 14%. Moreover, if one takes into account the numerous payroll tax deductions, one realises that even the highest-paid workers rarely pay more than 25% in payroll taxes – and that a minority of workers.

In any case, even if capital gains were taxed less than workers’ wages, that would suggest that the solution is to lower taxes on workers, not raise taxes on others. It’s a pity that politicians do just the opposite…

2. Withholding taxes on non-residents

Legislative competence: federal government

Revenue competence: Federal and Länder governments

Administrative competence: federal government

Tax burden: 15%. In the case of directors’ remuneration 30%.

Withholding taxes are all taxes that are not paid directly by the taxpayer but are paid to the state via a third party. There are withholding taxes on capital gains or personal income tax, however, in this section, we will only discuss withholding taxes for non-residents.

The German tax system distinguishes between unlimited taxpayers (tax residents) and limited taxpayers (non-residents). The first group consists of persons who reside or have a habitual residence in Germany. They are taxed in Germany on all their income – irrespective of where they receive it. The second group consists of persons who earn income in Germany but do not reside or have a habitual residence in Germany.

Both natural persons and legal persons (companies, partnerships, associations, etc.) can be limited taxpayers (non-residents). This tax (withholding tax) of 15% is levied on the income they earn in Germany.

There are withholding taxes on income from artistic or sporting activities, television appearances, use of copyrights and remuneration for being a member of the board of directors of any company based in Germany.

Thus, if a foreign musician, Argentinean, or Spanish, for example, gives a concert in Germany or a tennis player competes in a tournament taking place in Germany, 15% of his or her fees must be paid to the state.

The organisers of the event deduct this 15% as a precaution before making the payment and pay it to the state without it ever passing through the hands of the musician or athlete.

In the case of income earned as a member of the board of directors of a German company, a higher tax rate of no less than 30% applies.

Withholding taxes for non-residents are part of income tax or corporation tax. Individuals usually have to pay income tax on the income they earn, whereas legal entities have to pay corporate income tax.

As it would be administratively and organisationally burdensome for non-residents (as they naturally live abroad), this withholding tax system is used. In Germany, individuals and legal entities are exempt from tax if, as part of a single performance in the field of art, sport, or entertainment, they earn fewer than 250 euros.

The taxation system of non-residents has existed since the 1930s, and the latest version came into force in 2009. Through globalisation, it has become increasingly important, as more and more musicians, athletes, etc. perform internationally and more and more board members of German companies have their residences abroad.

These taxes are administered by the Federal Central Tax Office. The revenues flow to the federal and Länder governments.

3. Import taxes on agricultural products

Legislative competence: EU and federal government

Revenue competence: EU

Administrative competence: federal government (customs)

Tax burden: varies according to product

Since its accession to the European Union, Germany has harmonised its customs duties with the other members of the Union, a process known as ‘harmonisation’. This includes tariffs on agricultural products, which have become regulated both by EU treaties and by national legislation. Of course, only exporters from non-EU countries – ‘third countries’ – have to pay them, as there are no tariffs within the EU. Tariffs are applied when the price of agricultural products imported into the EU is lower than the average price in the EU. It is the difference between the two prices that have to be paid in tariffs. The revenue goes to the EU coffers.

4. Export taxes on agricultural products

Legislative competence: EU and federal government

Revenue competence: EU

Administrative competence: federal government (customs)

Tax burden: currently suspended

The export tax on agricultural products is levied on EU exports to third countries if they are sold at a price below the EU average price. The idea is to protect the EU internal market from possible bottlenecks caused by over-exporting. This is, of course, economic illiteracy, because no country has ever gone into crisis because its citizens and companies have ‘over-exported’ without state intervention. The good news is that there are currently no export taxes.

5. Alcohol tax

Legislative competence: federal government

Revenue competence: federal government

Administrative competence: federal government (customs)

Tax burden: EUR 1,303 per hectolitre of pure alcohol

People like to drink alcohol, and countries like to tax their citizens. How does this story end? Well, with every country in the world happy and content to tax alcoholic beverages for centuries.

In Germany, the Spirits Monopoly Act took care of this from 1919 until 2017. On 1 January 2018, it was replaced by the Alcohol Tax.

To no one’s surprise, the consumption of alcohol in Germany makes this tax a very lucrative business for the German government, as the annual revenue from this tax amounts to more than €1 billion. The sad reality is that every time someone gets drunk (or just has a drink) they are financing the looters who plunder them.

With the reform that came into force in 2018, alcohol taxation was harmonised with EU countries. Thus, the Alcoholic Beverages Tax Law refers to the Combined Nomenclature (an EU list of goods) to list the alcoholic products subject to the tax. These are ethyl alcohol of any strength – denatured or undenatured – and spirits containing more than 1.2% alcohol by volume: as well as other beverages and mixtures of these beverages containing more than 22% alcohol by volume.

The amount of the tax is measured according to the quantity of pure alcohol at a temperature above 20 degrees celsius. For one hectolitre (100 litres) of alcohol, €1303 is payable. There are reductions for alcohol produced in a distillery producing up to 3 hectolitres per year, as well as for alcohol produced in certain types of distilleries producing up to 4 hectolitres per year. In the first case, €1022 per hectolitre would be paid, while in the second case €730 per hectolitre would be paid. Alcohol products can be completely exempted from alcohol tax if they are used for medicinal products, foodstuffs (except beverages, of course), flavourings, vinegars, cosmetics and in the context of heating and cleaning for purposes other than the production of goods. The tax is levied by customs and the revenue goes to the federal government.

The name ‘alcohol tax’ would lead an unsuspecting and innocent reader to believe that this is the only tax on alcoholic products, but nothing could be further from the truth. In addition to the alcohol tax, there is the tax on alcopops (relatively high alcoholic mixtures, usually sweetened, marketed in small bottles suggesting low alcohol content), the tax on beer, the tax on sparkling wine (which has an interesting history, to be discussed later) and the tax on intermediate products.  We will come back to these later.

6. Tax on alcopops

Legislative competence: federal government

Revenue competence: federal government

Administrative jurisdiction: federal government (customs)

Tax burden: €5500 per hectolitre of pure alcohol

The alcopops tax was introduced in 2004 with the aim of protecting young people. The intention was that by making sweet alcoholic beverages so expensive, young people would not be able to afford them. This noble aim was never achieved, as, despite a general decline in alcohol consumption among the population as a whole, alcohol consumption among 12–17-year-olds increased in the years following the introduction of the tax. Instead of protecting young people, the tax resulted in children spending more money out of their pockets on alcohol. Needless to say, the tax was never abolished.

This tax affects products that mix alcoholic beverages with non-alcoholic or low-alcoholic beverages that are marketed in closed containers and have an alcohol content of more than 1.2% but less than 10% by volume. The amount of the tax on alcopops is much higher than that of the tax on alcohol: €5500 per hectolitre of pure alcohol at a temperature above 20 degrees Celsius. In practice, however, this is not a big deal for the state coffers, as it affects far fewer beverages than the alcohol tax and there are fewer young people (the main consumers of these products) than adults and the elderly. So, despite all the drunkenness they produce, alcopops only bring in 2 million euros a year.

7. Withholding taxes on construction

Legislative competence: federal government

Administrative competence: state governments

Tax burden: 15%.

This withholding tax on construction, officially called ‘withholding tax on construction services’, is a part of income tax, more specifically corporate income tax. It is payable both by craftsmen (income of natural persons, subject to income tax) and construction companies (income of legal persons, subject to corporate income tax). It was introduced in 2002 to combat undeclared work in the construction sector, and meant that, for each completed work, the client must pay 15% of the invoice amount to the State. In other words, to make the legality of an activity more attractive, they add a tax on it. This is the famous politician’s logic. And don’t forget: you will also have to add sales tax to the invoice.

If the construction service provided is less than €5,000, no construction withholding tax is applied; the same applies if it is a non-VAT rental turnover providing a service of less than €15,000. This tax is administered by the federal government.

8. Beer tax

Legislative competence: federal government

Revenue competence: state governments

Administrative competence: federal government (customs)

Tax burden: €0,787 per hectolitre and degree of Plato

The third tax on alcoholic beverages on our list is the beer tax. It applies to malt beer and beer mixtures with non-alcoholic beverages. The amount of the tax is fixed by law up to the third digit of the cent: €0,787 per hectolitre and Plato grade. Unless our readers are chemists, all this information will most likely be all Greek to them. The Plato unit does not calculate your homebrew, but the original wort content of the dissolved malt ingredients that are generated during beer production. For a normal beer of about 12 degrees Plato, the tax would be 9,44 cents.

There are reductions for breweries producing fewer than 200,000 hectolitres per year and not legally or economically connected to any other brewery. The relief is calculated in increments of 1,000 hectolitres and ends at 5,000 hectolitres or less, in which case they would be exempt from 56% of the normal tax rate. There is no tax on beer for home consumption – which is legally only a product owned and used within the company – nor for the first 200 litres of non-commercial beer brewed as a hobby. Despite the love for beer in Germany, beer tax revenues are decreasing. Over the last few years, customs squeezed some 600 million euros a year from breweries, with the revenue going to state governments.

9. Own revenue from Gross National Income

Legislative competence: EU and federal government

Revenue competence: EU

Administrative competence: federal government

Tax burden: depends on the EU budget

German taxpayers not only finance the German state with their taxes, but also the European Union. The EU is financed by four sources of revenue:

– Contributions that Member States have to pay on the basis of their gross national product, more specifically their gross national income (GNI), called GNI own revenue (which currently accounts for 75% of revenue).

– Customs duties and sugar levies, called traditional own revenue (13%).

– Contributions paid to the EU budget from national turnover taxes, called VAT own revenue (11%).

– Other revenue from, for example, EU staff incentives (1%).

GNI-based own revenues are not a tax on German citizens, but a kind of EU tax on the German federal budget. The reason for this high percentage is that GNI-based own revenues are intended to cover the difference between all other sources of revenue and expected expenditure in the EU budget. As expenditure is increasing, the GNI own revenue side of GNI also continues to grow. Each state pays a different contribution, proportional to its economic capacity, which means that, of course, Germany is the biggest payer in the EU. Unfortunately, there are many indications that contributions to the EU will increase further in the future.

10. Sales tax on imports

Legislative competence: federal government

Revenue competence: federal and Länder governments

Administrative competence: federal government (customs)

Tax burden: 19%.

VAT in Germany is 19%, and goods imported from abroad are not exempt from this tax: when crossing the border, they must pay import VAT, which is the same as normal VAT. The same reductions apply to them as to domestic products. Goods are exempt from the tax if they are under a special customs procedure or if they come from another EU country (the tax only applies to non-EU countries). The revenue does not go to the EU, but to the federal and Länder governments. The annual revenue from this tax amounts to €50 billion.

11. Income tax

Legislative competence: federal government

Revenue competence: federal, state, and municipal governments

Administrative competence: state governments

Tax burden: 0 to 45%

Of all the taxes in existence, there is none better known than income tax. If you have income, you are obliged to share it with the state. In that sense, it is the most visible form of your taxation. Looking back, one discovers that income tax is surprisingly young: we knew nothing about it until after the Middle Ages, and it was not until the 19th century that states began to impose it, mainly to finance their wars. The United States introduced it temporarily during the Civil War, abolished it after the Civil War, and then reintroduced it in 1914 to finance its participation in the Great War.

In Germany, most Länder have been using income taxes since the 19th century, but it was not until 1920, after the founding of the Republic, that a uniform income tax was introduced.

A curious detail: the first tax rates in most countries were ridiculously low compared to today’s rates. At the time they were only in single digits, and then, over time, they reached the figures that are considered normal today.

Only natural persons – i.e., real persons and not legal constructs such as companies, which pay different taxes – are subject to this tax. Both individuals and members of a company are considered natural persons. Persons who are resident or ordinarily resident in Germany have unlimited tax liability: they must pay tax in Germany on all income earnt in or outside Germany. The Income Tax Act provides for seven different types of income:

– income from agriculture and forestry

– income from business transactions

– income from self-employment

– income from non-self-employment

– income from capital assets

– income from rents and leases; and

– other income.

Income from non-self-employment accounts for by far the largest share of Germans’ income. Despite the ‘other income’ item, there is still some income that is not subject to income tax. These may be subject to other taxes or are exempt from taxation, such as income from lottery winnings, for example.

Income tax is a progressive tax, which means that its tax rate increases according to the level of income. In other words: it punishes more those who earn more.

The tax-free amount in 2020 was an annual income of €9408. For income above this threshold, tax rates ranging from 14% to 42%, which is the maximum tax rate, apply.  To be subject to the top tax rate, an annual income of €57,052 is sufficient. Any subsequent increase in income is taxed at the same rate. Finally, there is a special tax rate of 45%. This is the so-called ‘wealth tax’, which is payable from an income of € 270,501 per year.

Although income tax is considered a tax, it can be levied in several ways, and not only in the annual income tax return. Employees pay the tax on their salary through the wage tax (see later in the article) and the employer pays it directly to the tax office in the payroll.

Capital gains are taxed by the final withholding tax, services rendered in the construction sector are taxed by the construction tax, income earned in Germany by non-residents or persons who do not habitually reside in Germany is taxed by the withholding tax for persons with limited tax liability…

Whoever has paid any of these taxes no longer has to declare income taxed in the process of these other taxes in his income tax.

No other tax has as many reductions as income tax. In addition to the basic tax relief mentioned above, there is also the separation of marriage and child tax relief, whereby married couples and parents pay a reduced rate of tax. Why is this reduction justified? The idea is that spouses have more money to ‘produce’ future taxpayers. In addition, many other expenses can be deducted from the tax, so that the actual tax rate for most Germans who know a little about tax law is reduced compared to the initial tax rate. The burden of administering this very important tax falls on the state tax offices.

Income tax is the state’s largest source of tax revenue. Wage tax alone – its main component – brings in more than 200 billion euros a year, which is about a quarter of total tax revenue. The spoils are shared between the federal and state governments, each with 42.5 per cent. The remaining 15% goes to the municipalities. From Tax-Free Today we are clear: people must wake up and see what is happening, we are being robbed from all sides, taxes are the new form of slavery of the 21st century.

12. Energy tax

Legislative competence: federal government

Revenue competence: federal government

Administrative jurisdiction: federal government (customs)

Tax burden: varies according to the product.

In this day and age, any form of energy consumption is seen as an attack on the environment and our children, so it is not surprising that there is an energy tax that capitalises on this idea.

Yet the energy tax has a relatively old predecessor: the 1939 hydrocarbon tax. For the Greens, this year does not look like a good time to celebrate its anniversary, but they are certainly much happier with the latest version of the energy tax, which was introduced in 2006.

This tax is levied on the consumption of energy products (mainly hydrocarbons, natural gas, and coal) for energy purposes. The seller pays the tax directly to the state on the invoice. More than two dozen different tax rates apply to different energy products. Here are some examples:

– Coal: €0,33 per gigajoule

– Light heating oil: €61,35 per 1000 litres

– Heavy heating oil: €25,000 per 1000 kilogrammes

– Natural gas and other gaseous hydrocarbons: €5,50 per megawatt/hour

– Liquefied gas: €60,60 per 1000 kilograms.

The tax is collected by customs and goes directly to the federal coffers. The annual revenue from this tax amounts to more than 40 billion euros. Non-energy consumption of energy products is exempt from this tax.

Officially, to promote environmental protection, there are benefits for energy sources that are considered ‘environmentally friendly’. Another thing the Greens should be happy about, as their lobbying has paid off and those energy sources that they like so much are massively supported by subsidies.

There are other exemptions from the energy tax for local public transport, agriculture, and forestry and energy products within the production of energy products.

However, the energy tax is not the only tax on energy consumption, because thanks to the German Green Party there is also a tax on electricity, which will be discussed later.

13. Inheritance and gift tax

Legislative competence: federal government

Revenue jurisdiction: state governments

Administrative competence: state governments

Tax burden: between 7% and 50%.

In this section, we will discuss two taxes that are virtually identical to each other.

The first is the inheritance tax, which should really be called ‘the grave robber tax’. It arises when a natural person leaves property to a natural or legal person upon his or her death.

For the transfer of property to be subject to inheritance tax, the deceased person must have been domiciled or habitually resident in Germany and must not have resided abroad for more than 5 years as a German citizen.

He would also be subject to inheritance tax if, irrespective of his place of residence, he had an employment relationship with a German company and received a salary for this.

A further condition is, of course, that the heir accepts the inheritance awarded to him or her, as he or she has the option to renounce the inheritance.

The amount of inheritance tax depends on the degree of relationship between the deceased and the heir. There are three different tax classes:

– Tax class I applies to spouses, civil partners, parents, and other living ascendants (ancestors), children, stepchildren and grandchildren.

– Tax class II applies to siblings, first-degree nieces and nephews, stepparents, parents-in-law, sons and daughters-in-law, divorced spouses, and former common-law partners.

– Tax class III applies to all other persons, including legal persons (companies).

Different tax rates are payable depending on the value of the inherited property. There are 7 different tax rates, which are calculated differently for the three different tax brackets:

– Up to €75,000: 7/15/30 per cent.

– Up to €300,000: 11/20/30 per cent

– Up to €600,000 €: 15/25/30 per cent

– Up to 6 million euros: 19/30/30 per cent

– Up to 13 million euros: 23/35/50 per cent

– Up to 26 million euros: 27/40/50 per cent

– Over 26 million euros: 30/43/50 per cent

The tax allowances depend on the degree of relationship. Tax class I receives the highest tax allowances:

– Spouses and cohabiting partners can receive up to €500,000 from a tax-free inheritance.

– Children, stepchildren and, if their parents are deceased, grandchildren; they receive an allowance of €400,000.

– Grandchildren whose parents are not deceased have an allowance of €200,000.

– All other persons in tax class I have an allowance of €100,000.

– All persons in tax classes II and III enjoy a tax-free amount of €20,000.

The largest reductions are available for the inheritance of real estate. In an act of generosity on the part of the German tax system, the spouse can even receive the family home completely tax-free. In other cases, concessions apply not only to inherited real estate but also to household goods.

Reductions also apply to the inheritance of business assets, which is intended to prevent heirs from dissolving a business due to tax pressure.

Gift tax is a supplement to inheritance tax. Its rules are largely identical to those of inheritance tax (tax categories, tax rates, allowances), except that gift tax applies to the transfer of assets between living persons.

One of the differences, compared to inheritance tax, is that you can only accept an exempt amount every 10 years, so if you want to distribute valuable gifts, you will have to plan well.

Through inheritance and gift tax, the state collects around 7 billion euros a year. The taxes are administered by tax agencies, and the revenue goes to the federal government.

Inheritance taxation has existed in Germany since the time of the Franks. In 1906, all state inheritance taxes were unified, which formed the basis for today’s inheritance taxation. So, corpse desecrators have a long tradition in Germany.

14. Fire protection tax

Legislative competence: federal government

Revenue jurisdiction: state governments

Administrative competence: federal government

Tax burden: after deduction of insurance tax, between 14% and 40%.

Fire protection is an important issue in Germany. Standards are becoming stricter and stricter, which makes the building code longer and more complicated. Moreover, the state levies a specific tax, the fire protection tax, the funds of which are effectively spent on fire protection.

This tax is administered by the federal government, with the revenue flowing into the coffers of the Länder. Insurers offering fire protection cover are responsible for paying this tax if the insured objects are located in Germany. They have to pay insurance tax on their income (more on this later), and the fire tax is deducted from it.

There are three forms of fire insurance. Thus, when adding insurance tax and fire protection tax together, the following tax rates are obtained:

– 22% for fire protection and fire extinguishing insurance (of which 40% for fire protection tax and 60% for insurance tax);

– 19% for home insurance (of which 14% for the fire protection tax and the remaining 86% for the insurance tax); and

– 19% for home insurance (of which 15% for fire protection tax and 85% for insurance tax).

The first such tax was introduced as early as 1931, and in the most recent version – from 2010 – administrative authority was transferred to the federal government and the current tax rates were set. The annual revenue from this tax exceeds 400 million euros.

While it makes sense to all of us to have fire protection, it is clear that there is over-regulation in this area in Germany. It is certainly not the case that a fire protection tax is needed to prevent buildings from burning down.

15. Beverage taxes

Legislative competence: state governments

Revenue Competence: municipal governments

Administrative competence: municipal governments

Tax burden: currently suspended

Our next tax, the beverage tax, gives us immense joy: it has been suspended throughout Germany. We do not know whether it will return, but for the time being it is history.

The beverage tax has a long tradition going back to the 12th century and continuing into the 20th century. However, by the time the 1980s came around, the tax only existed in Hamburg and a few towns in Hesse and Lower Saxony. In 2009, Offenbach was the last city to abolish the beverage tax.

Until it was discontinued, the municipal governments were responsible for administering this beverage tax.

It was a classic local tax. It affected both alcoholic and non-alcoholic beverages, which were described in more detail in the laws of each federal state and in the statutes of the municipalities and cities.

All businesses selling these beverages were obliged to pay the tax. They were also the ones who opposed this tax. Although it was a very small tax, its abolition has been a surprising success. Fingers crossed that it will never return.

16. Business tax

Legislative competence: federal government

Revenue competence: municipal governments (with collection by federal and Länder governments)

Administrative competence: state and municipal governments

Tax burden: varies by state and municipality

This tax applies to any entrepreneur resident in Germany. The first thing to do to register a business in Germany is to inform the Trade Licensing Office. This obligation has no other purpose than to assure the Trade Licensing Office in advance of your participation in all possible future profits. And this tax does not only affect brave individual entrepreneurs but also partnerships and limited companies.

Only a few professionals (such as doctors and tax consultants, for example) and agricultural and forestry companies are exempt from this tax.

The amount of tax is based on business income. For sole proprietors and partnerships, there is a basic tax-free amount of € 24,500. Each subsequent tax base is calculated by first multiplying it by the national tax rate of 3.5% in increments of one hundred and multiplying it again by a tax rate set by the municipalities. The average of the latter is about 400% (which means multiplying by four).

I am sure it is much clearer with an example: if a trader has an income of €100,000 and the tax rate of the municipality is 400%, the resulting tax burden will be €10,570. Let’s see how we have calculated it:

– Taxable income free of tax: €100,500 – €24,500 = €75,500

– Tax rate: 75 500% 100 = 755; 755 x 3.5 = €2642.50

– Assessment rate: 2642.5 x 4 = €10,570

The annual revenue from business tax amounts to more than 40 billion euros. For municipalities, this tax represents one of the most important sources of funding. However, they have to share the revenue with the federal and Länder governments through the trade tax, the amount of which is determined almost annually. The national average of the trade tax is 25%.

The economic strength of a municipality can usually be assessed by looking at its trade tax revenues: as a rule, the higher they are, the better the economy is doing.

The city of Monheim in North Rhine-Westphalia is an example of successful tax reduction: its mayor, Daniel Zimmermann, drastically cut business tax in 2012 and, as a result, business tax revenues skyrocketed, leaving the city debt-free. As one might imagine, few municipalities have enough political will and economic expertise to emulate Zimmermann.

17. Property tax

Legislative competence: federal government

Revenue jurisdiction: municipal governments

Administrative jurisdiction: state and municipal governments

Tax burden: varies by type of property, state, and municipality

One of the oldest taxes in human history is the property tax. Even the most ancient cultures had the idea of taxing land ownership.

The current property tax law in Germany dates back to 1973. All properties owned by a landowner are taxed, whereby agricultural and forestry properties fall under property tax A, while developed or buildable properties and buildings are grouped under property tax B. The amount of the tax is determined in three steps.

The amount of tax is determined in three steps: first, each property is assigned an assessed value determined at a cut-off date.

The next two steps are similar to the determination of the business tax. The assessed value is multiplied by the tax rate in increments of one thousand, which ranges from 2.6% to 10% depending on the property. This calculation results in the amount of the property tax assessment.

Finally, the amount of property tax is multiplied by a tax rate that is determined by the municipalities. The assessment rates range from 0% to 1050% of the property tax amount, which on average is around 400%.

Let’s look at an example: a person owns a property with an assessed value of €100,000 and a tax rate of 3.5% and his municipality has an assessment rate of 400%. This person will have to pay a property tax of €1400:

Assessed value: €100,000

Tax rate: 100,000% 1000 = 100; 100% 3.5 = €350

Assessment rate: 350 x 4 = €1400

If a homeowner suffers a loss of value of his property through no fault of his own, he can apply for an exemption from property tax. This may apply, for example, to homeowners who have had an apartment burned down. Listed properties may also be exempt from property tax if their maintenance costs are higher than their income. The idea behind this is that, although Germany may be a society of the envious, it is also a nation that supports culture.

However, by its very nature, property tax remains particularly unfair because, like any such tax, it does not take into account the nature of its victims’ incomes.

Someone who owns a property valued at €50,000, but otherwise lives on social welfare, will have to pay property tax just like anyone else. You tell me what’s social about that…

Property tax is the most important of all taxes for municipalities. It generates 14 billion euros every year.

As you can imagine, rates are highest in highly indebted municipalities, with Berlin, Bremen and the municipalities of North Rhine-Westphalia suffering the highest rates.

In 2018 this tax hit the headlines because the Federal Constitutional Court ruled that the calculation of the assessed values for the former German Länder was unconstitutional, as they dated back to 1964.

However, to recalculate all unit values of all taxable properties would have been a titanic effort for the authorities.

In the end, new methods of calculating unit values were introduced, but the disputes have not yet been resolved. A fundamental reform of this tax seems inevitable in the coming years, and the Länder are already pushing for it.

18. Transfer tax

Legislative competence: federal government (amount determined by state governments)

Revenue competence: state governments

Administrative competence: state governments

Tax burden: between 3.5% and 6.5%.

You pay taxes not only on the real estate you own but also on the purchase of the real estate. The purchase contract already contains countless additional costs, and transfer tax is one of them. It is charged by the seller to the buyer and paid directly to the state.

Until 2006, the amount of the tax was 3.5% nationwide, but since then it has been determined by each state. Naturally, this has led to increases of up to 6.5% in most Länder. Together, they generate about 15 billion euros per year through this tax.

The purchase of real estate worth less than €2,500 is exempt from transfer tax, as are sales to first-degree relatives (which also includes spouses or cohabiting partners) and transfers on death and gifts.

Finally, whoever has to pay transfer tax on a purchase transaction does not have to pay sales tax in turn.

19. Dog tax

Legislative competence: state governments

Revenue competence: municipal governments

Administrative competence: municipal governments

Tax burden: varies by state/municipality

Yes, you read that right, it’s no joke. Anyone who thinks that man’s best friend is safe from the greed of the state is very much mistaken. Dogs are also taxed in Germany. More specifically, dog ownership.

With this tax, the state officially intends to limit the number of dogs. They do not intend to deal with dog excrement on the streets or dangerous fighting dogs, because if that were the case, the problem could be tackled in a different way. No, it is about fewer dogs. And, in truth, it may not even be about that after all because, as always, behind these so-called regulatory policies there is often pure state greed.

The dog tax is administered by municipalities and, unless the state government does not allow it, municipalities can waive the dog tax. Even so, few municipalities do not levy it.

The dog tax laws in the Länder and municipalities regulate the amount to be levied, which varies from region to region.

However, it must be said: when it comes to the dog tax, people are often so good that they are stupid. Those who do not register their dog do not have to pay this tax, and even those who do so hardly have to fear penalties if they do not pay this tax. So, in practice, this tax is one of the most harmless in the ruthless repertoire of the German tax authorities.

20. Hunting and fishing taxes

Legislative competence: state governments

Revenue competence: municipal governments and districts

Administrative competence: municipal governments and districts

Tax burden: varies by state, municipality, and district

Imagine that you feel like taking a break and indulging in a hobby you enjoy in order to relax, you decide to go hunting or fishing. Once again, the state is with you. Of course, these activities are also taxed in Germany.

The revenue from taxes on hunting and fishing goes to the Länder and, unlike most taxes, these are administered by the municipalities and districts.

The combined revenue from these two taxes amounts to just over 10 million euros per year. In the case of the hunting tax, the legal person with a hunting licence is responsible for payment. It is levied annually and collects the value of the annual hunt.

In the case of the fishing tax, the number of fishing districts (indeed, fishing is also strictly regulated in Germany) forms the basis for taxation. Like the dog tax, if you don’t want to pay, you can always hunt and fish illegally. Not that we at Tax-Free Today condone such behaviour, but that’s an option…

21. Coffee tax

Legislative competence: federal government

Revenue jurisdiction: federal government

Administrative competence: federal government (customs)

Tax burden: €2,19 per kilo of roasted coffee and €4,78 per kilo of soluble coffee

When coffee consumption became considerably popular in Germany back in the 17th century, the German Länder started to tax coffee consumption. This tradition survived the times of the German Empire, the Weimar Republic, Nazi Germany, and today’s Federal Republic of Germany. The latest version of the coffee tax law applies to both domestic sales and imports from abroad.

For one kilogram of roasted coffee, the seller has to pay €2,19 coffee tax to the State, and for one kilogram of soluble coffee, €4,78. Goods containing between 10 and 900 grams of coffee per kilogram are also taxed.

VAT must, of course, be added to this tax. Coffee products are thus among the most heavily taxed goods, even though, unlike alcohol or tobacco, their regular consumption is in no way harmful to health. Rather, it is pure and simple greed on the part of the state, which manages to turn this popular product into a source of revenue that brings in 1 billion euros a year.

22. Church tax

Legislative competence: state governments

Revenue competence: churches

Administrative competence: state governments and churches.

Tax burden: between 8% and 9%.

The separation of church and state is a fantastic development that we owe to the ideals of the Enlightenment movement. In Germany, people rejoice and take pride in having achieved this goal and look with disdain at other countries where religion still determines politics, such as… the United States. At least that is the country that many Germans think of as an example of over-powerful religious fundamentalists. In the USA, however, it would be unthinkable to levy a church tax, while in Germany such a tax is a sad reality.

The tax is levied on anyone who belongs to a religious society recognised as a public corporation. This does not apply to Islam or Scientology, but it does apply to most Christian churches.

Church membership is determined by the internal law of the church. Those who do not want to pay church tax can leave their church – in which they were often born – which involves a great deal of bureaucratic and, in some Länder, financial effort.

For those who wish to remain in their church, a different tax rate applies depending on the state. In general, the amount depends on the income tax (also in its forms of wage tax or final withholding tax).

Those living in Bavaria or Baden-Württemberg have to pay a surcharge of 9% as church tax in addition to the income tax they pay. In all other Länder, the surcharge is 8%.

The regime of separation of spouses offers reductions if both spouses belong to a church (not necessarily the same church). The church tax can also serve as a reduction of income tax, i.e., the church tax paid is deducted from income tax. This rule does not apply to the final withholding tax, which must still be paid in full, even if church tax is also paid.

The right of the churches to collect compulsory contributions from citizens has a long tradition in Germany. Already in the time of the small independent states, before the unification of Germany, many German states applied this measure, and in the Weimar constitution of 1919, it was extended to the whole of Germany.

In 1933 it was confirmed by the Nazis in the Reich Concordat and finally reaffirmed in 1949 in the Basic Law. Thus, the separation of church and state was never completed in Germany.

Thus, in the 21st century, the tax authorities continue to collect church tax and transfer more than 12 billion euros a year to the individual churches.

And of course, with this money, the members of the church institutions manage, despite all their promises of charity and beneficence, to live the good life.

23. Corporate taxation

Legislative competence: federal government

Revenue competence: federal and Länder governments

Administrative competence: state governments

Tax burden: 15%.

Corporate income tax is the closest thing to a corporate tax. Legal entities (companies) that generate income are subject to this tax. These legal entities include associations or cooperatives but above all public limited companies, such as AGs and GmbHs (equivalent to the British Ltd and the American LLC). These are the most important legal forms of companies in Germany, as they generate the most profits and employ the most employees.

All profits made by a company per year must be taxed at 15%. To avoid double taxation, distributions of profits from one company to another are not taxed.

Of course, corporation tax is not the only form of ‘business tax’: there is the personal income tax – which includes the super-rich entrepreneurs, so hated by the left – and also the business tax, applicable to individuals and companies, which has higher revenue than corporation tax itself.

But even so, corporate tax is the ‘business tax’ that is best known to the public. It is administered by tax offices and brought in some €32 billion in 2019.

Its origins date back to the founding era of the German Empire, as it was at that time that the legal form of the joint-stock company emerged. It was officially introduced in 1920, the same year as income tax, and has been modified ever since – including in the 2008 corporate tax reform. Incidentally, in the US the tax rate for what would amount to corporate tax was 35% before Trump, who lowered it to 21%. Surprisingly enough, Germany is less greedy in this case.

24. Motor vehicle tax

Legislative competence: federal government

Revenue jurisdiction: federal government

Administrative jurisdiction: federal government (customs)

Tax burden: varies according to the type of vehicle and its characteristics

Anyone who owns a motor vehicle in Germany, the country of the automobile, must pay road tax, colloquially known as vehicle tax.

The term ‘motor vehicles’ includes, among others, cars, motorbikes, light vehicles, trailers, motor homes, trucks and buses. All vehicles within Germany are subject to taxation, and it is the vehicle owner who is responsible for paying it.

Whether the vehicle is used or not, and who uses it, is irrelevant: if a vehicle is registered with the road traffic authorities, it is subject to tax and the owner will have to bear the corresponding tax burden.

If it is a foreign-registered vehicle whose owner does not reside in Germany, it may be exempted from paying the tax for one year if it is not used for the transport of persons or goods for remuneration. After that year, the person using the vehicle in Germany must pay motor vehicle tax.

The amount of the tax depends both on the type of vehicle and on other factors such as engine capacity, type of traction, pollutant emissions, date of registration and total weight. On this basis, there are dozens of possible tax rates for their owners, who can calculate them using so-called ‘motor vehicle tax calculators’ to be on the safe side before paying.

For example, in the case of a passenger car, the date of first registration, the type of traction, the cubic capacity in cubic centimetres and the CO2 emissions in grams per kilometre all play a part in calculating the tax. Here is an example:

A car registered after 01/01/2014 and using a diesel engine will have to pay as road tax:

– €9,50 per 100 cm3 of cubic capacity;

– €2 per gram of CO2 emissions per kilometre (with an exemption limit of 95 g/km).

If you have a vehicle with a cubic capacity of 1000 cm3 and CO2 emissions of 120 g/km, you will have to pay €145 road tax:

– 1000% 100 = 10; 10 x 9,50 = €95

– 120 – 95 = 25; 25 x 2 = €50

– 95 + 50 = €145

As a general rule, Germans pay an average of between €100 and €200 motor vehicle tax per year for newly registered cars.

According to the current environmental policy, electric cars are exempt from taxation for the first 5 years. Vehicles that are used exclusively for specific purposes are completely exempt from taxation. In this group we find, for example, vehicles used in agriculture and forestry; service vehicles for the police, armed forces, or fire brigade; vehicles intended for regular service or street cleaning. Concessions are available for severely disabled vehicle owners.

The patent application for the first automobile occurred in 1886. It did not take long for the first automobile tax to come into place – introduced in Hesse-Darmstadt in 1899.

In 1922, a modern motor vehicle tax law was introduced. In the Federal Republic of Germany, this remained the responsibility of the Länder for a long time, but since 2014 the road tax has been administered entirely by customs, and the €9 billion a year it brings in goes to the federal government and no one else. As the tax is not earmarked, it is not spent to support the infrastructure in any way, but for whatever the bureaucrats feel like.

25. Wage tax

Legislative competence: federal government

Revenue competence: federal, state and municipal governments

Administrative competence: state governments

Tax burden: between 0% and 45%.

Wage tax is the part of the income tax payable on employees’ salaries. The employer pays it directly to the German tax authorities, and the employee does not see a single cent of this amount. Depending on the size of the salary and the marital status, there are six different wage tax classes, for which there are different benefits.

Married people are better off than single people (spousal sharing), parents get advantages over those without children (child allowance) and low earners have more benefits than high earners.

With more than 200 billion euros in revenue, the wage tax is the highest tax revenue-collector in the state’s arsenal.

26. Air traffic tax

Legislative competence: federal government

Revenue jurisdiction: federal government

Administrative competence: federal government (customs)

Tax burden: between €12,90 and €58,82 per flight

All these people who have grown up in an environmentalist environment are often scandalised by how cheap it is to fly, while at the same time racking up miles and miles of travel on their backs in their fight for a better world.

The truth is that flying is made enormously expensive by a series of taxes. In a free world, airfares would be less than half the current prices. A good example of this is the air traffic tax introduced in 2011.

This is a tax that must be paid for every flight departing Germany. It does not matter whether it is a single ticket or a one-way ticket for a stopover: you must pay. There are three distance classes: short, medium, and long haul.

A short-haul flight costs €12,90, a medium-haul flight costs €32,67, and a long-haul flight costs €58,82. And a reminder: you also have to pay VAT on each flight, of course. In short, it’s a real rip-off.

There are exemptions for sports and private pilots, sovereign, military, and medical flights; tickets for serving flight personnel and passengers under the age of two who do not have their own seat.

The federal government’s revenue from this tax amounts to more than 1 billion euros per year until 2020. And yet this still seems too little to the Greens. They will only be satisfied when flying becomes a luxury that only they can afford.

27. Own revenue from VAT

Legislative competence: EU and federal government

Revenue competence: EU

Administrative competence: federal government

Tax burden: 0.15% of turnover tax revenue

This is another of the EU states’ contributions to the financing of the EU budget. It is stipulated that part of the national VAT revenues must be transferred to the EU. This tax can thus be seen as an EU tax on the German federal budget and not as a direct tax on German citizens.

The amount of contributions from national sales tax revenues that go into the EU’s clutches has been set at 0.30%. However, there are also reductions here: states with relatively low economic power have to pay less, and states that contribute disproportionately to the EU budget because of their high economic power also receive a ‘discount’. Thus Germany, with an economic power that is more than enviable for the rest of the EU, has to pay the Union ‘only’ 0.15% of its sales tax revenue.

28. Tax on gambling and lotteries

Legislative competence: federal government

Revenue jurisdiction: state governments

Administrative competence: state governments

Tax burden: between 0.25% and 20%.

I would venture to say that every German has played the lottery or placed sports bets at some point in his or her life. Well, the tax authorities think this is fantastic, and as a result, the tax on betting and lotteries brings in more than 1 billion euros a year for the state. Horse racing, sports betting and lotteries are subject to this tax.

– The providers of race betting must pay 5% of the stakes to the State.

– Suppliers of sports betting must pay 5% of bets to the State. This applies both for bets on sporting events in Germany and abroad, and with both domestic and foreign betting providers. The decisive factor for taxation is whether the sporting event takes place in Germany or whether one of the players is resident in Germany.

– Providers of domestic lotteries and other lottery games must pay 20% of the expected price of all tickets to the State. In the case of foreign tickets brought into Germany, 0.25% of the expected prices must be paid to the State.

The racing betting tax is due monthly, the sports betting tax on the 15th day after the end of the registration period and the lottery tax even before the start of ticket sales.

Lotteries where no tickets are distributed or where tickets have a value of less than €650 are exempt from taxation.

Games of chance with charitable and ecclesiastical motives are also exempt from taxation, provided that the value of the tickets distributed is fewer than €40,000.

The law on which the current tax is based has existed since 1922 and is now administered by the Länder.

29. Broadcasting licence fee

Legislative competence: Federal Government

Revenue competence: The Consortium of Public Broadcasting Institutions of the Federal Republic of Germany (ARD), the Second German Television (ZDF), and the public broadcaster Deutschlandradio.

Administrative competence: the contribution service of ARD, ZDF and Deutschlandradio

Tax burden: €17,50 per month

The broadcasting licence fee is not included in the budget of the federal, state, municipal or district governments. Nor does it appear in any graph of the tax burden on the German population. And yet this is nothing more than a tax: a compulsory fee imposed by the federal government. The only thing that is special about it is that being fully earmarked, this tax is not administered by any legislative body, and its revenue does not go to any legislative body. Instead, the broadcasting fee, which is €17,50 per month (€210 per year), is administered by the contribution service of ARD, ZDF and Deutschlandradio.

The revenue of more than 8 billion euros that it generates goes to the broadcasting associations ARD, ZDF and Deutschlandradio, each of which has different programmes. In order to have to pay the broadcasting fee, you don’t even have to listen to programmes of the public broadcaster (ÖR). It is enough if you have the possibility to do so to have to pay for it.

The ÖR is supposed to provide citizens with objective and neutral information, as it is financed by taxes and is therefore not dependent on any sponsors. However, anyone with a modicum of lucidity knows that the ÖR broadcasters do not report international current affairs any better than private news channels do.

Tax funding does not guarantee objectivity and neutrality, and ÖR news often shows a clear bias in favour of left-wing ideologies, which could easily be considered propaganda.

On the other hand, the ÖR is not only there to provide Germans with political news. Far from it. It has long since mutated into an entertainment medium. This in itself is not provided for in its foundations.

If we take into account that the average ÖR viewer is over 60 years old, any attempt to pass off this expenditure as a social contribution is completely dismantled, because people of this age have, on average, higher incomes and assets than the country’s young and old.

The modern German ÖR is nothing more than a caricature of the original concept, and a blatant example of a bureaucrats’ self-service shop. And of course, these bureaucrats have no remorse whatsoever, because for them every police and forensic series, every soap opera and every new music and culture programme strengthens German democracy.

And another thing that the population must hate with all its being is the extensive powers of the contribution service of ARD, ZDF and Deutschlandradio.

They are allowed to send out reminders and carry out foreclosures, as we imagine the thugs of a typical criminal gang would do. On top of that, it is quite possible that the broadcasting rate will increase in the future. We should have no illusions that the ÖR will be abolished in Germany, even with a minimal reduction of the fee.

30. Alcoholic beverage license tax

Legislative competence: state governments

Revenue competence: districts

Administrative competence: districts

Tax burden: varies by district

The liquor license tax is a type of license required to open any restaurant business. It is payable once and is levied on sales in the year of opening or the following calendar year. The amount varies between 2% and 30% depending on the district.

Restaurants have been taxed since the Middle Ages. In the history of the Federal Republic of Germany, the liquor license tax has always been administered by the municipal and district councils.

Today, the liquor licence tax is of little importance, as its revenue is fewer than one million euros per year. However, attention should be paid to it, as it has happened on occasions that some people have organised a private party and drank without having registered as a business and have had to pay the tax afterwards. So always be careful when inviting people to a party.

31. Tax on sparkling wine

Legislative competence: federal government

Revenue jurisdiction: federal government

Administrative competence: federal government (customs)

Tax burden: €51 per hectolitre for volumes of fewer than 6% alcohol, and €138 per hectolitre for volumes of more than 6% alcohol.

The sparkling wine tax is the perfect example of how taxation works. One day it occurs to the rulers of the day that a tax is necessary to change the behaviour of citizens or to address a particular problem, but then time goes by and although the original raison d’être has long since ceased to exist, the tax generally does not disappear.

In the present case, the tax was introduced in 1902 to finance the German Imperial Navy. However, as we know, the Kaiser no longer rules Germany, two world wars were lost, there were two Germanys, then a reunification and now the Federal Republic of Germany, but after all this, the sparkling wine tax is still there, oblivious to the passage of time.

After the Second World War it was officially justified with the purpose of helping to repair the damage caused by the war, but with its latest version in 1993 there is no longer any purpose left other than to take money from consumers.

The beverages affected by this tax are, on the one hand, beverages bottled with a sparkling wine stopper and fixed by a special clamping device (including cava and champagne), and, on the other, beverages that suffer an overpressure due to carbon dioxide equal to or greater than 3 bars when being at a temperature greater than 20 degrees Celsius, and which are included in headings 2204, 2205 or 2206 of the Combined Nomenclature (including grape must, vermouth and cider).

The amount of the tax is €51 per hectolitre for volumes of alcohol of less than 6% and €138 per hectolitre for volumes of alcohol of more than 6%. Thanks to the tax on sparkling wine, the tax authorities’ pocket around 400 million euros per year. All this revenue goes into the federal government’s coffers.

However, there is a bit of good news: there are wines in Germany that are not taxed. Although the EU imposes a compulsory tax on wine, the effective tax rate on wine in Germany is 0 euros. The tax on sparkling wine prevents all wines from being tax-free, but wine that is not considered sparkling wine is still tax-free. In other words, as long as it is not sparkling wine, you can drink wine in Germany without a guilty conscience (because of the money you would be leaving to the maniacal German rulers).

 32. Solidarity surcharge

Legislative competence: federal government

Revenue competence: federal government

Administrative competence: state governments

Tax burden: 5.5% surcharge on income tax or effective corporate income tax

If the sparkling wine tax was the best example of a tax that will never be abolished even though it has no raison d’être today, the solidarity surcharge may be the second-best example. It was introduced in 1992 to rebuild the East German Länder after 40 years of communist destruction and ruin and was paid in both Germanys equally. To this day the tax is still there.

The solidarity surcharge is payable by both natural persons and legal entities, and its amount is based on income: natural persons have to pay a surcharge of 5.5% on the income tax due to them, and legal entities have to pay a surcharge of 5.5% on the actual corporate income tax.

For individuals, there is a rebate and reduced tax rates if annual income is below a certain threshold.

18 billion euros per year in revenue, this tax is currently one of the largest taxes in history. The money flows entirely to the federal government and is not earmarked for a specific purpose.

The rulers can spend it on all sorts of things, and the Länder of former East Germany do not have, nor have they ever had, any claim on the revenue collected in the name of their reparation.

This astonishing fraud is about to turn 30 years old. Will it be abolished before the end of the 21st century?

33. Casino tax

Legislative competence: federal and Länder governments

Revenue competence: state governments

Administrative competence: state governments

Tax burden: varies from state to state, ranging from 20-80% of gross gaming revenue.

‘The banker always wins’ is one of the most famous casino sayings. And while it may not be entirely true, as all the card-counting geniuses have shown us, we could make a much truer variation: the state always wins. Or, at least, it always gets its share of everyone’s bets.

This is guaranteed by the casino tax, which applies to all public casinos in the Federal Republic of Germany.

It is a special tax, as it replaces all other taxes (income tax, sales tax, lottery tax, etc.) that casinos would normally have to pay.

The amount varies from one federal state to another, ranging from 20% to 80% of the gross gaming revenue, i.e., the difference between the stake and the players’ winnings. Although this may seem a very wide and not very high range, the average tax is an astonishing 60%.

This small detail is the reason why we should change the saying to ‘the state always wins’.

For every euro that a gambler loses in Germany, an average of 60 cents goes to the state coffers, not to the bookmaker. Gross gambling revenues are not calculated annually, but every day by the tax officials of the Länder. If there are losses on one day, they are offset against the profits of the following days. There is no way to reduce this tax, which collects around 30 million euros each year.

The extremely high tax burden means that casinos have to pay a much higher tax rate than normal businesses. The tax burden is estimated to be twice as high, even if tax exemptions for all other taxes are taken into account.

Incidentally, gamblers do not have to pay tax on their winnings. It seems that it is enough for the State to pocket their losses.

34. Electricity tax

Legislative competence: federal government

Revenue competence: federal government

Administrative jurisdiction: Federal government (customs)

Tax burden: 2,5 cents per kilowatt-hour

The electricity tax was introduced in 1999 by the Socialist-Green coalition government. Apparently, electricity in Germany was not yet expensive enough. In any case, electricity is taxed at 2,5 cents per kilowatt-hour consumed.

A three-person household in Germany consumes on average more than 4000 kilowatt-hours per year. This tax is paid directly to the state by the electricity supplier when the bill is issued. The tax is collected by customs and the revenue flows into the federal government’s coffers. This tax translates into more than 6 billion euros each year.

Green energy sources, such as solar, wind, geothermal and biomass energy, which are already heavily subsidised, are exempt from the tax, as one would expect from these green policies.

Small installations, the power supply of boats and electricity used to generate energy are also exempt from taxation.

There are also reductions and bonuses for agriculture and forestry, among others, and also for rail transport and trolleybuses, justified on environmental grounds.

35. Tobacco tax

Legislative competence: federal government

Revenue competence: federal government

Administrative competence: federal government (customs)

Tax burden: varies according to product, quantity and selling price

Probably no product has had as bad a press in recent decades as tobacco. As terrible as lung cancer is, the furore over the measures has long since crossed the limits of totalitarianism. All the more so when you consider that a large proportion of these measures are supposedly designed to protect not smokers, but passive smokers, despite the fact that there is no evidence or proof whatsoever that passive smoking causes any health damage. But if there is one measure aimed at directly targeting smokers and discouraging them from smoking, it is the tobacco tax.

This measure has been used, at least recently, as a justification for raising tobacco taxes. In fact, this tax has existed in Germany since 1906, when absolutely nobody was concerned about lung cancer.

In our time, too, it is very likely that state greed plays at least as important a role as the supposed concern for health policy.

The current version of the Tobacco Tax Act stipulates that tobacco tax is payable on the purchase of cigarettes, cigars, smoking tobacco (including shisha) and other products made from other substances instead of tobacco but which meet the other requirements (e.g., herbal cigarettes without tobacco).

In order to determine the amount of tax, both the quantity in units (in the case of cigarettes and cigars) or in kilograms (for smoking tobacco) and the retail selling price are required.

In the case of cigarettes, the applicable tobacco tax is 9,82 cents per unit plus 21.69% of the retail selling price.

If sales tax is added to this, more than half of the price of a packet of cigarettes is accounted for by taxes. According to politicians, the health policy objective of reducing tobacco consumption has been achieved, but it is difficult to know whether the decline is really due to the tax increase.

Social campaigns against smoking have likely played a more important role in this phenomenon.

Nor should we believe that tobacco tax is paid by the big tobacco companies: the real tax burden is, of course, borne by tobacco users (who are mostly lower class).

The annual revenue from the tax, which ends up entirely in the hands of the federal government, is 14 billion euros. Of course, one might wonder whether the anti-smoking politicians are happy with these figures or whether they would prefer their mission to succeed and the tax revenue to go down to zero euros.

36. VAT

Legislative competence: federal government

Revenue competence: federal and Länder governments (with municipal participation)

Administrative competence: State governments

Tax burden: 19% Tax burden

One of the most important taxes in all countries of the world is VAT. Almost everywhere it constitutes an important part of tax revenues. In Germany, the annual sales tax revenue exceeds 230 billion euros per year and is increasing every year. It is administered by the Länder and accounts for a quarter of total tax revenues.

After wage tax, it is the most important tax in the country. Most of the revenue goes to the federal and Länder governments, with the former receiving the largest share. In addition, a small but significant part of the revenue goes to the municipalities for their budgets.

The tax rate in Germany has been 19% since 2007, making it one of the highest in the world. Following the Coronavirus pandemic, it was temporarily lowered to 16%. There are reductions of up to 7%, and in some cases, sales tax may not apply at all. However, for most entrepreneurs and the self-employed, there is no way to get out of paying the 19% that they must give to the government for every good or service they provide. Unless, of course, they forget to issue an invoice, which is often the case…

37. Tax on public amusements, games, and entertainment

Legislative competence: state governments

Revenue competence: municipal governments

Administrative competence: municipal governments

Tax burden: varies by state and municipality

Sometimes referred to as the ‘sex tax’ in the media, the tax on amusements, games and public entertainment is a tax that can be levied on a variety of services that provide amusement and pleasure.

It includes events such as film screenings (ticket tax), slot machines with or without the possibility of winning (gaming machine tax) and, following the legalisation of prostitution in 2001, sexual services (prostitution tax), as well as strip clubs.

The tax is administered by the municipalities and goes into their budgets. Almost all Länder have their own laws regarding this amusement tax, in the end, the municipalities are the ones who have the possibility to collect this tax.

The annual revenue it generates amounts to more than 1 billion euros. Every visit to the cinema, every bet in the casino and every lap dance brings in money for the treasury.

The saddest thing is that, even if the customer is not having fun, he will still have to pay the tax. The state doesn’t care whether you have fun or enjoy yourself when it comes to charging you this curious tax on amusements, games and public entertainment.

38. Insurance tax

Legislative competence: federal government

Revenue jurisdiction: federal government

Administrative competence: federal government

Tax burden: 19%

‘Life is full of dangers. Take out insurance’. Few people have internalised this motto more than the Germans. The average German is insured against everything. Risk is the enemy of any plan for the future – and also an invaluable ally of the state.

The insurance tax was introduced during the Weimar Republic. The current tax rate has been in force since 2007: insurers must pay the state 19% of the premiums of all insurance policies.

The tax does not apply to statutory pension, health, and unemployment insurance, nor does it apply to private health, life and occupational disability insurance. There is an additional tax for fire protection insurance, the fire protection tax (discussed above), which is deducted from the insurance tax.

The federal government administers the tax and keeps the revenue, which amounts to about 14 billion euros per year.

By the way, for those who think that it serves insurers well to pay this (and any other) tax. That’s not how it works, companies pass this tax directly on to the consumer and their suppliers. Of course, the same goes for taxes on any other big business, be it banks, technology, energy or whatever.

39. Customs duties

Legislative competence: EU and federal government

Revenue competence: EU

Administrative competence: federal government (customs)

Tax burden: varies according to goods and services

Customs duties are one of the traditional means of financing the EU. Of course, German Länder have historically levied tariffs against each other, and later against other states; but in the context of the European Union, Germany has ceded its customs powers to Brussels.

This is regulated both in national laws and in EU treaties. As a member of the European Customs Union, Germany does not levy customs duties on member states, and votes jointly on customs duties on third countries.

The absence of customs duties in the EU (or rather in the European Customs Union, which is not exactly the same thing) is often used as an important argument in favour of the EU.

However, it should be borne in mind that free trade can be hindered not only by tariffs but also by so-called ‘non-tariff barriers’, such as the introduction of increasingly stringent environmental protection standards, labour legislation or bureaucracy in general.

The EU is an organisation that practically lives by such measures. Moreover, EU member states are not allowed to conclude free trade agreements with other states on their own, which is likely to result in fewer free trade agreements, as it takes much longer to get dozens of member states to agree to sign a treaty.

In this way, EU policy has also been significantly detrimental to free trade. In recent decades, thanks to negotiations, tariffs have fallen around the world, and the EU has not needed to do so in most cases.

In conclusion, a Brexit by all EU countries would make the most sense.

40. Second home tax

Legislative competence: state governments

Revenue competence: municipal governments

Administrative competence: municipal governments

Tax burden: varies from state to state and municipality to municipality

Anyone who lives in Germany and has earnt an income that allows him or her to own a second home is, in short, the object of envy and hatred of his or her compatriots. As always, the tax authorities manage to turn these basic feelings of citizens into a tax.

In most Länder the taxation of second homes is left entirely to the municipalities, which usually levy tax rates of between 10 and 15 per cent of the net annual rent.

Anyone who, in addition to their main residence, has a second home is obliged to pay this tax, irrespective of whether the property is rented or owner-occupied.

Exempted from the tax are mainly dwellings whose owners are not considered wealthy and are therefore not subject to the tax. Included in this exempt group are, inter alia, the accommodation of posted workers, accommodation for soldiers or police officers, flats occupied by minors or apprentices, accommodation for persons who have not been registered in Germany for more than two months, and flats in nursing homes or for therapeutic purposes.

While these exceptions are laudable, you don’t have to be rich to suffer from this tax in your pocket: an upper-middle-class lifestyle is sufficient. This archetypal envy tax was only legalised by the Federal Constitutional Court in 1983 and brings in more than 100 million euros a year for the municipalities.

41. Tax on intermediate products

Legislative competence: federal government

Revenue competence: federal government

Administrative competence: federal government (customs)

Tax burden: between €102 and €153 per hectolitre

The intermediate products tax is the fifth and last tax on alcoholic products (as well as the last tax on our list).

Taxable products are alcoholic beverages that are not taxed as beer, sparkling wine, or wine, have an alcohol percentage by volume of between 1.2% and 22%, and fall under headings 2204, 2205 and 2206 of the Combined Nomenclature.

Sherry and port wine, among others, would fall into this category. The contribution of this pure federal tax ranges between 10 and 20 million euros per year. There are three different tax rates:

– if the percentage of alcohol by volume is more than 15%, the amount to be paid is €153 per hectolitre;

– if the percentage of alcohol by volume does not exceed 15%, the amount to be paid is €102 per hectolitre; and

– if the percentage of alcohol by volume does not exceed 15% and they are bottled with sparkling wine corks fixed by a clamping device, or which have an excess pressure due to carbon dioxide equal to or greater than 3 bar at a temperature above 20 degrees Celsius, the amount to be paid shall be €136 per hectolitre.

Conclusion

And here we end our touristic excursion through 41 German taxes.

As we said, Germany is one of the countries with the highest tax burden, but the reality is that many of the taxes we have talked about today will also be similar in your country and, especially now, in the midst of the economic and health crisis, more supposedly temporary taxes will be added.

Anyone reading this article will understand that taxes are a scam and that if states are left to their own devices, they only grow and grow, creeping into more and more corners of our lives, telling us how we have to live and robbing us of more and more of what belongs to us. All under the banner of patriotism, social justice, and supposed global welfare.

If this is how you understand it too, there is only one option left to you, to take the reins of your life and go where you are best treated. You can outsmart them, learn on our blog, with our ebooks or hire the Tax-Free Today consultation. Do what you want, but don’t stop there, take the plunge.

Keep in mind that stopping paying taxes is not only good for your pocket, but it also weakens the increasingly total control that States exert over their subjects.

Because your life belongs to you!