Rich Germans ask for higher taxes

A group of rich Germans has launched a petition calling for higher taxes on the rich to help their country recover from its economic crisis.

The campaign – “Vermoegende für eine Vermoegensabgabe” (Wealthy people in favour of a wealth tax) – proposes a five per cent wealth tax for two years followed by a reduction to one per cent for those with a personal fortune of more than 500,000 euros (US$750,000).

This is in sharp contrast to Malaysia’s move over the years to a regressive taxation model – reducing taxes for corporations and the rich, and now shifting the tax burden to the larger public, including the low-income group (currently exempted from income tax), through a new Goods and Services Tax (GST). Corporate tax has been progressively reduced from 40 per cent in 1988 to 26 per cent now, and now GST will be imposed probably at 4 per cent – for a start.

A partner in a leading audit firm in Malaysia reportedly predicts the GST strategy as follows:

“The strategy will be to start a low rate at the start and pulled up every few years,” he said.

As in most countries with GST in place, a reduction in corporate and personal tax will also follow suit, he said.

Contrast that with the German group, which estimates that a five per cent wealth tax would raise 100 billion euros ($150 billion):

The group (in Germany) says it does not want to see those gains swallowed by the general budget, but earmarked for specific projects in the areas of environmental protection, education and social services like health care and social welfare.

“The gap between the poor and the rich in Germany has widened during the last 15 years,” said Dieter Lehmkuhl, a retired doctor and one of the group’s founding members. One of the reasons for this, he added, were past governments’ tax reduction policies that favoured businesses and the rich, he added.

Unfair distribution of wealth in Europe’s biggest economy

“Hardly anywhere else in the world has the number of millionaires increased as much as in this country,” Lehmkuhl pointed out, while the incomes of most Germans had stagnated or even decreased.

Germany will soon be “among the most in-equal countries of the industrialized western world if unfair taxation policies continue,” Lehmkuhl warned and urged the government to reinstate the property tax that had been abolished 12 years ago. Full report here

Well, we have also seen a sharp rise in millionaires in recent times in Malaysia while many workers’ real wages have remained fairly stagant. This has made the country under BN rule one of the most unequal in the Asian region when measured by the Gini coefficient.

It’s time to move towards a more progressive tax model instead of shifting the tax burden towards the lower-income group. If it ever came to power, would the Pakatan shift towards a progressive model?