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Home›Tax Haven›“Don’t be surprised if billionaires keep growing”

“Don’t be surprised if billionaires keep growing”

By Judy Grier
June 12, 2021
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Bezos and Co-Pay often only pay US tax authorities billions of dollars for their wealth that grows each year. In an interview with Capital.de, tax expert Stephen Bach gave good reasons for this. He explains why the situation is still unfair and how to improve the system.

Mr. Bach, do you understand the excitement of the richest people in America who pay such a low tax?

Stefan Bach: Well, in principle it’s cold coffee, although precise tax data is now available. Warren Buffett joked that his secretary had a higher tax rate than him.

Why?

The incomes of many super-rich are rarely distributed in the private sector and therefore are not subject to progressive income tax. They collect their monster income in their companies or structures. Withholding tax or a similar tax in other countries is only levied when they recognize and distribute the profit. But it does not distribute profits, but invests more.

Labor income is taxed more than capital income in Germany and the United States. This should create some trouble.

Yes, but it is also important not to tax income twice. German companies already pay up to 30% tax on corporate profits. Once owners pay their wages, they pay 25 percent flat tax and solos for the remaining 70 percent.

The incentive is therefore to keep the profit with the company.

Exactly. This is how we encourage real investment, for example among medium-sized German companies. But we encourage the rich to acquire wealth, whether they invest at home or abroad. It should come as no surprise that the number of billionaires in our country continues to increase. You can reinvest your profits, pay only corporation tax, but no withholding tax or progressive income tax.

Does Low Taxation on Equity Investments Still Encourage Investment?

The difference between Bezoszmok and our good German medium-sized companies is that the corporate tax burden can reach 30% due to investments in medium-sized companies. Elon Musk and Jeff Bezos also don’t pay much attention to their success. The United States has imposed heavy taxes on the profits of domestic companies. In Europe and Asia, musk or bezos are taxed and diverted to tax havens that tax corporate profits via Ireland, Luxembourg and other countries. See Buecher.de and Amazon. Some had to pay taxes on their profits, others did not. It is certainly an unfair competitive advantage. This is why we obtain an international minimum tax for companies.

So it’s a dilemma. On the one hand, the wealth of the rich continues to grow because they can reinvest their profits at a lower tax rate, and on the other hand, the investments are tax-efficient. How can this be changed?

You can reduce the income of large investors to income tax. But it is difficult. Or you can tax keyword richness and richness, but that too has its problems. Ultimately, it is still a question to be resolved: fairness or efficiency? This also applies to inheritance tax. Small inheritances are tax exempt. The rich with ordinary wealth should pay ten percent faster. The super-rich with big corporations and holding companies are largely generic. But if you approach it in practice, there is a lot that you can do. A lot of the super rich see the connection and are willing to pay more taxes for the public again. You should not overtax where there is financial damage. In real estate, for example, Germany is a tax haven.

What tax increase is really possible without affecting the economy?

The combination of wealth, inheritance taxes, high capital gains and property taxes generate between 20 and 30 billion euros per year without harming investment, jobs and growth. This money should be used to get rid of the overworked middle class, which is burdened with social security contributions and income tax.

Roland Lindenblatt spoke with Stephen Bach

Interview first Capital.de Posted.



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