In the early 1970s the Laffer-curve emerged as a new form to describe the relationship between a tax rate on the one hand and tax revenues generated by government on the other. Arthur Laffer argued that in some cases, a reduction in tax rate can trigger an increase in tax revenue, while an increase can trigger a reduction in tax revenue. Individuals’ effort, Laffer argued, will be affected by the tax rate. The less of their profits remain, the less effort individuals will put into work leading to an overall decrease in tax revenues. Other researchers assembled a number of factors that influence people’s willingness to pay taxes or their inclination to evade taxes. Attitudes towards the government, perceived fairness of taxes and attitudes towards basic religious and cultural development are amongst these variables (Frey, 1989; Sandmo, 1976).
As usual, when it comes to scientific results, German authorities seem bare of any kind of knowledge. It’s because they don’t need this knowledge! Take members of German tax authorities, to these people talking of people’s willingness to pay taxes is preposterous. German people are obliged to pay taxes. It’s their lifelong duty. That’s what they are here for. It is not that people give some of their individual rights to authorities and allow them to act on their behalf, it is German authorities who allow German people to feel free in certain areas as a concession to what is deemed democratic rights in other countries.
However, individual freedom ends where authorities’ deem necessary. Therefore, it is quite suitable that Germans are seen as property by their authorities. As such they do not require respect, they do not require politeness, all that’s needed is for German citizens to comply to §§88, 90 Abgabenordnung or some other code of law. The funny thing is, that German authorities are staffed with “real” German people so you would think they will act as citizens in the first and as representatives of the authorities in the second place. But it’s the opposite. When employed by a German authority, German’s transform from being citizens to government rubber stamps and they take pride in that. Hans Ordinary becomes Hans the sleuth who detects a tax evasion in every tax return that crosses his desk. And he is quite eager to do so.
Build on a vast number of Hanses and the fact that German authorities think they have “their” citizens at lifelong disposal, interactions between tax authorities and tax payers deteriorate. Tax payer and taxman confront each other like soldiers in the Great War, in entrenched positions. The rude tone present in tax authority letters as well as the huge number of people bringing their funds to Switzerland and other save heavens give ample evidence of this. Not at any single point in time, German tax authorities let alone German Ministers of Finance got the idea that people’s obvious unwillingness to pay taxes might be a function of the way they are treated or of the amount of money they are left with after Government’s taxation hit them. It’s, as I said, your legal duty to pay taxes, you cannot escape this duty nor can you at any point in your life escape the ever-present suspicion that you evade taxes.
And so it comes that after living for 5 years in Britain, after paying taxes in Britain for the same period your German tax authority will remember you as one who has been squeezed in the past and one who should be targeted again. The result is the usual rude letter send to a (still) German citizen (German property that is) by the very same tax authority that in ancient times fought with the respective tax payer over such interesting questions as: Is the office in his house to be accessed only by a separate door or is there a chance to leave the sitting room via its window, move along a balcony and enter the very office by its French door, which would result in the office-expenses not to be considered as deductible expenses? The result is a certain feeling of being targeted by tax stalkers on my side and I start to wonder, whether the European Court of Human Rights should not rather sooner than later look into the way, German authorities think they can treat their citizens.
- Frey, Bruno S. (1989). How Large (or Small) Should the Underground Economy Be? In: Feige, Edgar L. (ed.). Underground Economies. Tax Evasion and Information Distortion. Cambridge: Cambridge University Press, pp.111-128.
- Sandmo, Agnar (1976). Optimal Taxation. An Introduction to the Literature. Journal of Public Economics 6(1): 37-54.