Dual income tax
As a dual income tax system of income tax is referred to, in which two parts of the income each different tax rates are subjected.
Demarcation
The world currently prevailing principle is that of comprehensive income tax with uniform taxation of total income.
Country comparison
The concept of a dual income tax in Finland, Sweden and Norway in various forms since about 2000 basis of income taxation.
With the introduction of the flat tax in 2009, it is also applicable for income tax purposes in Germany.
Principle
In the dual income tax, the income of the taxpayer so-called schedular is in two parts, split, which are then subject to different tax rates. Earned income is taxed directly to the progressive income tax schedule. Capital income is taxed at a lower contrast, constant tax rate ( flat tax ).
The reason given for the different taxation of two income components generally with the point of view of international competitiveness and tax efficiency. In contrast to income from capital income can be very easily relocated internationally. Therefore, the tax rates on capital income should be low in order to attract investment. Conversely, the tax rates could be higher on earnings to generate the necessary tax revenue. This is a dual income tax in respect of the recoverable volumes in principle more efficient than a synthetic income tax.
Non - taxation of fictitious profits by inflation
Furthermore, the dual income tax is intended to reduce the taxation of fictitious profits from inflation. This means that the dual income tax the principle of taxation on the performance statement. Income from capital and from company to provide a particular part simply compensate for the loss in value of assets due to inflation dar. These parts do not increase the capacity of the taxpayer, but still be part of the tax base. Due to the lower tax rate this injustice is corrected.
Schedular demarcation
The division between earned income and capital income is made differently in the various concepts of the dual income tax. For most entrepreneurial capital income gains, dividends, interest, income from renting and leasing and capital gains are counted. For earned income generally includes income from employment, pensions and statutory old-age pensions.
Main difficulty of the dual income tax is the demarcation of the two schedular. Due to the lower tax rate on capital income have an incentive to shift profits in this area.
Tax reform proposal in 2006 in Germany
For Germany, the Advisory Council on the Assessment of economic development in the annual report for 2003 has proposed the introduction of a dual income tax. In an expertise on behalf of the Federal Ministry of Finance, he has clarified its proposals in April 2006.
After the split in capital and earned income should not be based on the previous types of income, but only an imputed return on equity are taxed reduced. These shall be with interest and dividend income and capital gains of the component corresponding to this interest, capital income. In the present situation the Council of Experts considers this an interest rate of 6% on capital employed appropriate. The rest is subject to earned income as initially (re ) taxation under the Income Tax Act. Optionally, however, the assessment will be carried out with the normal rate for earned income.
Types of income in the dual income tax after the reform proposal:
- Income from agriculture and forestry
- Income from trade
- Income from self-employment
- Income from real property
- Income from capital gains
These are divided into
( Distributions truncated to share ownership level to interest deduction )