Tax shake-up means up to €160 more in 2012

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2 Jan, 2012 Updated Mon 2 Jan 2012 12:37 CEST
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The New Year has started prosperously for German workers, who will see their annual income increase by up to €160 thanks to tweaks made to the tax system.

Small changes are made to tax laws at the start of each year, but more often than not they balance out, making little difference to the average worker’s bank account. This year is different.

Calculations published by the Süddeutsche Zeitung daily suggest that this year’s tax-code changes may make more of a difference than the hotly debated tax-cuts scheduled for 2013, with those earning between €24,000 and €66,000 set to benefit the most.

Economist Frank Hechtner from the Free University of Berlin, who calculated the results, said much of this increase was thanks to a change in the statutory pension scheme. In 2011, 19.9% of a person’s annual income was paid into their pension fund; in 2012 this figure will be 19.6%. This drop alone will see someone earning an average wage around €60 extra a year.

The amount of income that a person can write off as tax deductable has also risen from €920 to €1,000. This is the first time such a change has been made.

Higher-earners, who usually benefit most from tax cuts, will only benefit by an average of €65 a year, while those with lower and mid-range wages will do best.

This is due to an increase in the minimum earnings level at which a person gets the option of abandoning the statutory healthcare system and going private. From January 1, people have to earn at least €45,900 a year to opt for private health insurance – an increase of €1,350. The equivalent for pension and unemployment benefits rose by €1,200 to €67,200 a year.

This means that high-earners have to pay social contributions on more than €1,000 more of their earnings than they did until now.

Hechtner also worked out that the tax reductions planned for 2013 will only see workers earning an extra €76 that year. When the second stage of the reductions is implemented in 2014, however, there should be more of a noticeable difference.

The Local/jcw



2012/01/02 12:37

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