Paying for info on tax dodgers is immoral

Buying stolen Swiss information on rich tax dodgers is wrong and puts Germany on shaky moral ground, argues Kai Biermann from Zeit Online.

Paying for info on tax dodgers is immoral
Photo: DPA

Should the state pay for illegally obtained data if it can be used to claw back hefty sum of tax money? It might be the pragmatic thing to do, but that doesn’t make it the moral path to take.

Anyone who engages in tax evasion harms society. The state must not tolerate such behaviour, which is why German Finance Minister Wolfgang Schäuble is planning to buy stolen information on tax dodgers who have hidden their money illegally in Switzerland.

Society must protect itself against harm. That is indisputable. Otherwise its very existence would be in doubt. This is, for instance, why we have the police.

But how far does this need for protection go?

Denunciation of criminal acts – universally defined and declared – is a traditional role for authorities, along with knowing when the law is being violated and, equally, promoting people’s willingness to report crimes by offering incentives. Rewards are regularly offered for “helpful information” to help solve crimes.

Germany’s railway operator, for example, pays people up to €600 for reporting vandals caught spraying graffiti. Thus they try to avert harm from that otherwise would affect everybody.

In times past, it was called a bounty put on someone’s head to encourage others to deliver the offender to justice. Dead or alive, as the saying went back then.

Things are different today, yet such a reward from Deutsche Bahn for a vandal, or from the German state for a tax dodger, still exposes the same problem as it did back in the Wild West: It tries to enforce justice in a region where the sheriff or finance minister otherwise cannot. It is a stop-gap measure and therefore an indication of a deeper flaw.

Given Switzerland bucks and stonewalls as much as it can whenever the subject turns to the money in its banks, German authorities are left with the difficult task of pursuing tax dodgers.

Tough luck, one might say. But it’s not enough to say Switzerland regards itself as a democratic country just like Germany. That would fail to appreciate the fact that the country resists the widespread notion that paying taxes is an unavoidable civic duty. It must therefore be the German government’s goal to persuade Switzerland to co-operate – this is happening and already showing results.

To then buy incriminating information regardless, because the profit ratio is so attractive to the taxman (paying €2.5 million in bounty to get €100 million in taxes back), appears to be nothing more than a bounty. It also creates the appearance that a recent agreement on preventing tax evasion, reached with the help of the OECD, isn’t working.

But most important is the unsettling fact that the relevant evidence in this case was stolen and is supposed to be rewarded with a considerable sum of money.

Is the German government now going to establish a pension fund for Swiss bankers? When the bankers are fed up with managing the money of criminals they can simply sell their customers’ information to the relevant authorities. It would have been more ethical had these bankers openly refused to deal with illegal money in years past. But they failed to do this and they are now being rewarded to boot.

According to the philosopher Immanuel Kant, pragmatic acts have nothing to do with morality. Indeed they are the opposite. Every action should also function as a universal principle.

We would reward an honest person for finding and handing in a wallet. But a thief who remorsefully returns a wallet at best has his sentence reduced. The witness – if he is lucky – goes away as he came, no richer than he was before.

Certainly, the tax authorities should accept the data gratefully and use it if they get their hands on it. Yet even that is not completely above board. German law has no problem with such “fruits of the forbidden tree” as the justice system in the United States does. In that country, illegally obtained evidence cannot be used in court. Not so here.

At least the German government didn’t steal the information itself or obtained via torture or blackmail.

But that still doesn’t mean the tax authorities should make the bearer of this immoral package rich either.

This commentary was published with the kind permission of Zeit Online, where it originally appeared in German. Translation by The Local.

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Who benefits most under Germany’s tax relief plans?

German Finance Minister Christian Lindner says he wants to give taxpayers relief worth €10 billion in the face of rising inflation. But there is already pushback, with some saying high earners will benefit the most.

Who benefits most under Germany's tax relief plans?

What’s happening?

As Germany battles rising inflation, Finance Minister Christian Lindner has revealed a plan to give residents tax relief worth more than €10 billion in total. 

“Employees and low-income earners, pensioners and self-employed, students with taxable part-time jobs and, above all, families will benefit,” the FDP politician wrote in a guest article for German daily FAZ on Wednesday.

As well as an adjustment of the benchmarks in the income tax scale, child benefit and child allowance are also to be increased.

READ ALSO: How the German Finance Minister wants to ease inflation with tax relief measures

According to sources in the Finance Ministry, the so-called ‘Inflation Compensation Act’ provides for child benefits to be increased in two stages and also to be standardised. Under the plans, the first, second and third child will each receive €227 per month next year. From the fourth child onwards, €250 will be added. In 2024, the rates for the first to third child are to be raised again – to €233.

At the same time, Lindner’s draft provides for an increase in the basic tax-free amount, i.e. the income up to which no tax has to be paid. The Finance Minister wants to raise this limit from the current €10,347 to €10,632 in the coming year and €10,932 in 2024.

Finance Minister Christian Lindner speaks at a press conference in Berlin.

Finance Minister Christian Lindner speaks at a press conference in Berlin. Photo: picture alliance/dpa | Kay Nietfeld

READ ALSO: Germany pledges inflation relief tax package worth €10 billion

Other key values of the tax scale will also be shifted to compensate for the effect of so-called ‘cold progression’. This is the term used to describe a kind of creeping tax rise when salary increases are eaten up by inflation but still lead to higher taxation. People are then hit with higher taxes, although purchasing power does not increase at all in real terms.

“A tax system that also imposes higher taxes on people who are already suffering from high prices is not fair,” Lindner wrote in FAZ. Eliminating this is “not a patronising act, but is called for in several respects”. Lindner says his plans would benefit 48 million taxpayers.

Who would benefit most?

In order to mitigate the effect, the top tax rate, which currently starts at an income of €58,597, will only apply at a level of €61,972 in 2023, and €63,521 one year later.

However, the tax threshold for very high incomes will remain in place. The income limit of €277,826, on which the so-called wealth tax rate of 45 percent is charged, will not be changed.

But there is already widespread criticism of the plans because in absolute terms, top earners would benefit more from Lindner’s tax cuts than low earners.

The FDP’s coalition partners – the Greens – said they considered the plans to be socially unbalanced.

“High and highest income groups would receive more than three times as much as people with low incomes, who actually need the relief most urgently,” said Greens parliamentary group vice-president Andreas Audretsch. Furthermore, people with very low incomes would not get any relief at all because they pay no income tax below the basic tax-free amount.

Katharina Beck, the Greens’ spokesperson for financial policy, expressed similar views. “The other way round would be right: strong shoulders should bear more than low-income shoulders and not be disproportionately relieved,” she told the Redaktionsnetzwerk Deutschland (RND) on Wednesday.

Lindner’s plans have a greater impact on low incomes in percentage terms, but in absolute terms people with high incomes benefit more.

For example, a taxpayer with a taxable income of €20,000 is to be relieved by around €115 per year under the current plans. With an income of €60,000, the relief amounts to €471, according to figures from the Ministry of Finance. 

What’s the reaction elsewhere?

Vice-chairman of the SPD parliamentary group, Achim Post, said the relief doesn’t go far enough.

“The proposed increases in the basic tax-free allowance and child benefit are a step in the right direction, but they are not enough,” he said. 

He suggested direct payments as an alternative, which could provide targeted relief to people with small and medium incomes. 

A woman holds cash in her hand.

A woman holds cash in her hand. Photo: picture alliance/dpa | Daniel Karmann

‘Falls short’

Meanwhile, the German Trade Union Confederation (DGB) rejected the proposals. Lindner’s tax plan “falls far too short”, said DGB Executive Board member Stefan Körzell.

For the relief for people with small and medium incomes, the basic tax-free amount would have to rise to €12,800, said Körzell, adding: “Instead, top earners and the rich benefit, although they have far fewer problems coping with the current price increases.”

Körzell said that “top earners and the wealthy must contribute more to tax revenue”.

He said the FDP politician’s plans would cause “serious revenue shortfalls” for the treasury.

FDP Secretary General Bijan Djir-Sarai rejected the criticism as baseless. The adjustment is aimed at smaller and medium incomes and reduces “the tax burden of the hard-working middle”, he said.

For top earners, the relief amount is capped, he said. “The relief is fair and necessary so that people benefit from a wage or salary increase despite the high inflation and do not have to pay on top through a higher tax burden,” Djir-Sarai said.