Tax deduction

Tax subsidies or tax breaks are exceptions to the extent of tax or in the tax obligation, the reason is not in the control system. Tax concessions are used to pursue political goals. Your review must consider and weigh the impact on the objectives pursued and the side effects ( distribution, efficiency, deadweight loss ) compared to alternative measures.

• 5.1 Germany 5.1.1 Koch-Steinbrück list
• 5.1.2 controversies on the example of the traveling allowance

Definition

Tax subsidy is a term that has no particularly sharp contours in everyday language. The classification of certain tax provisions as tax subsidies is in the scientific debate in many cases largely undisputed, but is controversial in some cases.

After Georg Jochum tax subsidy ( tax ) be defined as follows:

Heinrich Wilhelm Kruse defines the term as one that differs from the tax exemption scheme, which leads to the public sector to tax revenues.

Subdivision

Tax subsidies can be divided according to whether they pursue a Steering purpose or a redistribution purpose.

The main reasons that can speak for tax breaks as an alternative to the expenditure side, subsidies or transfers and regulatory solutions mentioned by the OECD in particular the reduction of administrative costs, since less cash flows must take place, and the reduction of tax evasion and avoidance.

Objection

Nevertheless, the OECD notes that there are both theoretical and practical objections to tax concessions. There are also political-economic considerations as well as the issue of transparency.

Theoretical objections

The theoretical objections arise from the objectives of tax policy:

• Justice: Tax benefits have distribution consequences because ultimately those groups - typically the most - the most benefit for which the measures were not thought of. This effect is of the progression of the tax schedule reinforced ( "upside -down subsidy ").
• Enforcement problem: The tax authority is often not in a position to clarify the authority of a deduction in any case, because it lacks the resources and the domain-specific experience.
• Simplicity: Control systems are already in and of itself often complex. This complexity is increased disproportionately by tax concessions. The set of clauses, provisions, instructions and forms, grows, and consequently the layman lacks the necessary tax knowledge to all regulations apply correctly (lack of transparency). This can be particularly unfavorable effect on tax morale.
• Budget Responsibility: The cost of tax benefits are less obvious and more difficult to estimate. Misperceptions can thereby lead to unexpected, large revenue shortfalls.

Practical objections

Practical objections against the use of tax incentives include:

• The number of tax benefits recorded a rising trend. Tax concessions are often prepared by other parliamentary committees as a technical issue projects. Accordingly, often the comparison with other output projects that serve the same purpose is missing.
• The tax benefits are also growing in magnitude. Tax benefits are in fact historically subjected to any systematic or critical review. Consequently, they can grow out of control over time. Unlike expenditures, which have to be justified again and again, their need is not evaluated regularly. Politically popular is that tax expenditures tend to be less visible.

Political -economic objections

The politico-economic considerations that militate against tax breaks include tax breaks allow the fiscal ratio ( as defined today ) to decrease. Under today's definitions, the budget does not measure tax breaks still regulation. Therefore, the size of the budget is of limited significance with respect to the actual state activity in the economy. Therefore, the OECD recommends that tax incentives such as direct grants must be shown in the budget as any other issue. Otherwise, provide incentives, grants increased to provide tax relief and to subvert the functions of the budget with it.

Transparency

The OECD recommends to include the tax breaks in the budget and not as a loss of revenue, rather than spending. This would ensure better control of the tax breaks.

In some States

Germany

In Germany, the law does not specify the definition of a tax subsidy. The implicit reference system is de facto re-evaluated after each change in the law. The loss of revenue for the federal government amounted to € 15.8 billion, which represents 0.54 % of GDP. For federal and state governments in total they amount to € 26.7 billion. Looking at alternative estimates, such as those the Institute for World Economy in Kiel performs, as resulting estimated loss of revenue for the state of just under € 49 billion, representing a share of GDP of 1.7%. Germany has officially commissioned a systematic review of tax subsidies in attack, the views of various respected economic research institutes are involved. With this approach, the credibility of analysis and estimates should be increased.

In Germany there are several lists that designate certain tax provisions as tax subsidies, such as the subsidy Report of the Federal Government or the Koch-Steinbrück list.

Koch-Steinbrück list

The Koch-Steinbrück list was created in 2003 under the leadership of former Prime Minister Roland Koch and Peer Steinbrück. In it, among other things, the tax rules ( not a complete list ) referred to in the following subsections are referred to as tax subsidies. It also tax regulations are referred to as subsidies that are listed in the Subsidy Report of the Federal Government rather than subsidies.

The limitation on the deduction of expenses for traveling between home and the workplace (recognition of a traveling allowance as income-related expenses only from the 21st kilometer ) has been declared by a judgment of the Federal Constitutional Court of 9 December 2008 for unconstitutional because the regulation is an unjustified departure from the represents objective net principle and therefore incompatible with Article 3 paragraph 1 GG is ( equality ). Koch and Steinbrück continue to believe, that it was in the removal package a subsidy.

• Home owner
• Traveling allowance (not in the subsidy Federal Government report included)
• Tax exemption of grants from the employer for journeys between home and work
• Workers lump sum (not in the subsidy Federal Government report included)
• Savings allowance
• The deduction of special expenses for life insurance
• Allowance of € 50 per month for employees with certain benefits in kind
• Surcharge for Sundays, holidays and night work
• Tax cuts for expenses for household employment ( reasons of economic policy no degradation provided )
• Allowance for employee discounts
• Allowance for bonuses in kind from customer loyalty programs
• Half the tax rate for corporate capital gains (not in the subsidy Federal Government report included)
• Exemption of capital gains on entrepreneurs generally
• Tax reduction and special edition deduction for donations to political parties
• Exempt amount for severance
• Deductibility of business entertainment and gifts company (not in the subsidy Federal Government report included)
• Exemption of capital gains on income from agriculture and forestry
• Allowance farmers and foresters
• Assessing the gain from agriculture and forestry by average rates
• Reduction in tax rates and extraordinary income from forestry
• Allowance for sale of shares in corporations
• Exemption of capital gains on freelancers

Deductions for depreciation in the income tax:

• Tapering deductions for wear for Mietwohnbauten (not in the subsidy Federal Government report included)
• Increased Deduction for depreciation for buildings in redevelopment areas
• Sliding scale asset depreciation for movable goods (not included in subsidy government report included)
• Half-year of depreciation for wear for movable assets (not in the subsidy Federal Government report included)
• Immediate deduction of operating expenses for low-value goods (not included in subsidy government report included)

Pension income taxation on the income tax: ( is treated as a tax subsidy, but for the time being, no degradation is planned)

• Special edition of deductions for contributions to the statutory pension
• Income tax flat rate for certain future security benefits
• Tax regime for private pensions and occupational pensions in § 10a of the Income Tax Act
• Age discharge amount (not in the subsidy Federal Government report included)

• Approach of low yield values ​​in the agricultural and forestry assets for purposes of ErbSt
• Allowance for inheritance / gift of business assets
• Tax reduction for the purchase of business assets

• Liberation of contract research universities in the sales tax
• Exemption of medical services (still provided no degradation )
• Exemption of social insurance institutions, medical services, nursing homes, etc. ( still provided no degradation )
• Tax exemption for the procurement of insurance coverage (still provided no degradation )
• Tax exemption for the building societies and insurance agent (no breakdown provided reasons of economic policy )

• Employee savings bonus
• Volume discount at the beer tax
• Exemption of agricultural and forestry trade and industrial co-operatives in the corporate
• Exemption of agricultural trade and industrial cooperatives in the trade tax
• Tax exemption of hospitals in the trade tax (still provided no degradation )
• Tax concessions for agricultural diesel in the fuel tax law
• Tax concession for public transport in the Mineral Oil Tax Law
• Tax concession for electricity for running the rail railway traffic after the current tax law

Controversies on the example of the traveling allowance

Sometimes the view is represented in the scientific literature that the traveling allowance is a tax subsidy, partly is the decisively contradicted.

The tax standard, which sets the distance allowance ( § 9, paragraph 1, sentence 3 number 4 Income Tax Act) basically acts as a worse situation commuters. This results from the fact that the travel expenses represent expenses for the conduct of life in accordance with § 12 of the Income Tax Act. Without explicit regulation of the traveling allowance, the travel costs to work in accordance with the general clause in § 9 section 1 sentence 1 would be the Income Tax Act as business expenses tax deductible. Then, however, in the amount of expenses actually incurred while traveling allowance lump-sum travel costs on unrealistically low altitude ( according to the legal until the introduction of the traveling allowance in 1955 ). This goes so far that the income tax- lowering effect of the traveling allowance compensates for the reduction of the traveling allowance to € 0.15 per kilometer traveled ( in 2004), not even the tax burden caused by commuting fuel tax and VAT on petroleum. As a rule, the commuter rate often is no benefit, but a worse position dar.

With the introduction of transport independence of the traveling allowance in 2001, but then always gives a subsidy effect when a commuter actually no or only very low travel costs has (because he mitfährt in a community ride free).

In contrast, it is argued by Paul Kirchhof, the city election was a private decision and the travel costs to work therefore causes purely private, so that a tax deduction is not justified. Quite so simple can it DIW opinion but do not. The labor and housing markets are not fully flexible, and most of the workers were forced to take travel times and travel costs into account. The cost of commuting is (even after the Federal Constitutional Court considers ) to typical " mixed prompted " expenses, which in addition to the professional initiative of the preferences of the private life play a role. This talk of the DIW 's view for more to differentiate the advertising expense deduction for commuting costs by the proportion of vocational initiative.

Switzerland

A study by the Swiss Federal Tax Administration (FTA) in February 2011, showed that the estimated revenue losses due to tax breaks for the federal taxes depending on whether an income- or consumption-oriented control standard was used 21 billion francs per year ( 3.9% of GDP ) or CHF 17 billion (3.2%), respectively. For the direct federal tax, the losses amounted depending on the control standard 4.5 and 8.5 billion CHF (relative to total revenue of 17.9 billion) for VAT CHF 8.1 billion ( in relation to total revenue of 20.3 billion).

Overall, the FTA identified 99 tax incentives at the federal level, including 40 for the direct federal tax, 27 for VAT and 24 for the stamp duties. Among the most significant tax benefits that, among (quoting the annual loss of revenue for the federal government in CHF million assuming an income-oriented control standard):

• Deduction of employee and employer contributions to the second pillar ( the employee ): 3.500 million
• Deduction for contributions to column 3a: 830 million
• Children Deduction: 710 million
• Tax exemption of capital gains from private assets: 670 million
• Tax exemption on inheritance and gifts ( 1/ 5 of the set ): 600 million
• Deduction of traveling expenses of the salaried professional expenses -employed: 600 million
• Deduction for Foreign Board of the professional expenses gainfully Ender: 400 million
• Standard deduction for maintenance costs of properties within the private assets: 380 million
• Undervaluation of the rental value: 235 million
• Deduction of charitable contributions: 180 million
• Aufwandbesteuerung: no estimate

• Tax exemption of local authorities and their institutions
• Exemption of licensed transport companies
• Tax exemption of legal persons pursuing public or charitable purposes
• Reduced tax rate for associations, foundations and other legal persons

• Exemption of services in the health and social services: 1,930 million
• Tax exemption of the services of travel agencies: 60 million
• Tax exemption for companies with annual sales of less than 100,000 CHF 40 million