Archive for October 3rd, 2012

The other day I did some math to figure out the real cost of taxes and social security in Germany. Here is what I got for an average worker with a monthly gross income of 2’500 euro:

The employer has to pay 496.- euro in social security contributions. (As explained recently, this is paid by the employer but borne by the employee.)

Then there is 518.- euro in social security contributions to be paid by the employee, as well as 206.- euro in taxes (income, church, solidarity).

Overall the employee creates more than 3’000 euro in value. This is because the employer would not hire her if the total labor cost exceeded the value created. But out of the 3’000 euro, the employee only gets about 1’775 euro transferred to her bank account. That is, the average worker in Germany with a decent monthly income pays 34% of her value added to social security, 7% is deducted by taxation, and only 59% appears on her bank account. And of course this is only the direct taxation: if she decides to take that money from her bank account and buy something, the usual VAT is 19% (or 7% on food).

The bottom line is that even if you only have a decent income, in Germany more that 40% of your value added is confiscated by the government.

Advertisement

Read Full Post »