Does Germany Collect Revenue from Taxing Capital Income?

25 Pages Posted: 21 Jul 2005

See all articles by Johannes Becker

Johannes Becker

University of Cologne

Clemens Fuest

ifo Institute – Leibniz Institute for Economic Research at the University of Munich; Ludwig-Maximilians-University, Munich; Center for Economic Studies (CES)

Date Written: June 2005

Abstract

A widespread objection to the introduction of consumption tax systems claims that this would lead to high tax revenue losses. This paper investigates the revenue effects of a consumption tax reform in Germany. Our results suggest that the revenue losses would be surprisingly low. We find a maximum revenue loss of 1.6 percent of annual GDP. In some years, we even find a tax revenue gain. This implies that the current tax system collects little revenue from taxing the normal return to capital. Based on these results, we calculate a macroeconomic measure of the effective tax rate on capital income.

Keywords: cash flow tax, tax revenue effects, effective taxation of capital income

JEL Classification: H25, H21

Suggested Citation

Becker, Johannes and Fuest, Clemens, Does Germany Collect Revenue from Taxing Capital Income? (June 2005). CESifo Working Paper Series No. 1489. Available at SSRN: https://ssrn.com/abstract=759445

Johannes Becker

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Clemens Fuest (Contact Author)

ifo Institute – Leibniz Institute for Economic Research at the University of Munich

Poschinger Str. 5
Munich, DE 81679
Germany
++89-9224-1430 (Phone)

Ludwig-Maximilians-University, Munich ( email )

Schackstrasse 4 / II
Munich, DE 80539
Germany

Center for Economic Studies (CES) ( email )

Schackstr. 4
Munich, DE 80539
Germany
++89 2180-2748 (Phone)
++89 2180-17845 (Fax)

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