The Hidden Burden of the Income Tax: Compliance Costs of German Individuals

Freie Universität Berlin, School of Business & Economics Discussion Paper No. 2011/6

41 Pages Posted: 16 Feb 2012 Last revised: 6 Mar 2012

See all articles by Jochen Hundsdoerfer

Jochen Hundsdoerfer

Free University of Berlin (FUB); Norwegian Center for Taxation

Sebastian Eichfelder

Otto-von-Guericke-Universität Magdeburg

Kay Blaufus

Leibniz Universität Hannover

Date Written: April 1, 2011

Abstract

We analyze the compliance costs of individual taxpayers resulting from the German income tax. Using survey data that has been raised between December 2008 and April 2009, we find evidence for a considerably higher cost burden of self-employed taxpayers. Taxable income and the demand for external support are positively correlated with compliance costs, while the time effort of female taxpayers is significantly lower. We also find evidence for a positive correlation of education and tax knowledge with the compliance burden. By contrast, a joint assessment of a married couple seems to reduce the monetized time effort. The aggregated cost burden of German income taxpayers amounts to 6.1-7.2 billion €, respectively 3.2-3.7% of the income tax revenue in 2007. This estimate is higher than latest projections in a number of other European countries like Spain and Sweden, but significantly lower than results for the United States and Australia.

Keywords: Tax complexity, tax compliance costs, compliance burden, red tape, personal income tax

JEL Classification: H21, H23, H25, H26, H83

Suggested Citation

Hundsdoerfer, Jochen and Eichfelder, Sebastian and Blaufus, Kay, The Hidden Burden of the Income Tax: Compliance Costs of German Individuals (April 1, 2011). Freie Universität Berlin, School of Business & Economics Discussion Paper No. 2011/6, Available at SSRN: https://ssrn.com/abstract=1980211 or http://dx.doi.org/10.2139/ssrn.1980211

Jochen Hundsdoerfer (Contact Author)

Free University of Berlin (FUB) ( email )

Norwegian Center for Taxation ( email )

Helleveien 30
Bergen, Bergen 5045
Norway

Sebastian Eichfelder

Otto-von-Guericke-Universität Magdeburg ( email )

Universitätspl. 2
PSF 4120
Magdeburg, D-39106
Germany
0391-67-18811 (Phone)

Kay Blaufus

Leibniz Universität Hannover ( email )

Institut für Betriebswirtschaftliche Steuerlehre
Koenigsworther Platz 1
Hannover, 30167
Germany

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