The levies which make the greatest contribution to public revenues are income tax, value-added tax (VAT) and social insurance contributions. While income tax in Germany is charged on a progressive scale, VAT has a slightly regressive effect due to the relative decrease in expenditure on consumption as income increases. Although VAT affects considerably more people than income tax, the latter’s progressive influence dominates income distribution. Since not all tax-payers contribute to statutory social insurance schemes, it is not the households with the highest income but the ninth decile who bear the highest total burden of income tax, VAT and social insurance contributions in percentage terms. With this one exception, the burden of taxes and social security contributions in Germany rises steadily with income.

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