German income tax reform. A simulation model

Abstract

An independent commission on tax reforms and the Federal Ministry of Finance had been working for some time on basic changes of the German tax system. Their suggestions recently have been published (Bericht, 1971) just as many other proposals for tax reform from various experts, organizations, and political parties. Yet, compared with the Report (1966) of the Royal Commission on Taxation of Canada (Carter Commission) the German reform plans are less comprehensive and fundamental than the thorough economic analysis in the six volumes of the Carter Report. Since it is extremely difficult in Germany to obtain empirical data, I have attempted to develop a simple tax model to simulate the effects of a tax reform. The statistical analysis measures in particular the alternative consequences for the tax yield and the distribution of the tax burden to income groups.