The civil service tax privilege compared to the workforce

The German tax system is designed to burden citizens according to their economic performance, but on closer inspection there are considerable disparities between the various groups of employees. in particular the relationship between taxation of workers in the free economy and the tax treatment of civil servantsquestions about justice and the equivalence of the burdens. While workers are used for tax purposes for almost any benefit that accrues to them, members of the state service enjoy privileges, some of which undermine the principle of taxation on performance. A detailed analysis of the various income components andA system that favors civil servants in many respects and disadvantages employees is revealed to be deductible.

The aliment and the concept of tax-free shadow income

An essential aspect of the tax consideration concerns the nature of the salaries that members of the public service receive. In contrast to the employees working in the private sector, whose wages are usually fully subject to taxation, civil servants enjoy special treatment with regard to their pension benefits. The so-called alimentation, whichsubsistence and pension provision, is only taxed on the nominal income. Conversely, this means that the significant proportion of care that is due to protection in the event of illness, in care and in old age is taken completely tax-free as a so-called shadow income. The official thus benefits twice as heEnjoys the benefits of state welfare without having to pay taxes on them like a normal income from work.

Comparison with the benefits of the employees’ monetary benefits

If this regulation is related to practice in the private sector, the unequal treatment becomes clear. If an employee receives benefits from his employer in addition to his salary, such as life insurance contributions or accident insurance, these are treated as monetary benefits and subject to taxation. The tax authorities consider such grantsAs part of the income that goes to the employee. However, this logic does not apply to civil servants, although the state assumption of health care, the much better pension scheme and the regulations in the event of an occupational disability have the same economic character. These benefits do not have to be taxed, which leads to a significant relief, while workers for comparablecollateral must reduce their net wages.

The new regulation of special expenses and pension expenses

Another complex area of unequal tax treatment can be found in the regulations on special expenses, especially in the case of pension expenses. Taxpayers can deduct certain expenses, especially for insurance companies, from their income to save taxes. The state thus promotes private provision. In the past, there were maximum amounts forBoth groups were similar, with officials often receiving a flat rate if they did not pay their own contributions. With the large tax reform, however, pension expenses were restructured and deductibility increased over a long period of time.

The disadvantage of employees in the pension insurance

The new regulation meant that contributions to statutory pension insurance were initially only partially deductible, with this share slowly increasing over the years. As a result, employees have to pay a significant proportion of their pension contributions from already taxed income. If you retire later, you will have to pay tax on these payments again, even though youthe payments could not be claimed in some cases for tax purposes. For other pension expenses, such as life insurance or liability insurance, however, maximum amounts that apply to both employees and civil servants apply.

The advantage of officials in exploiting the maximum amounts

Here, however, a subtle but important advantage for officials is revealed. Since you do not contribute to social security, your maximum amounts for other pension expenses have not yet been used up by the employer’s contributions or your own social security contributions. You can claim your private insurance in full for tax purposes. Employees, on the other hand, haveDeduction options are often already exhausted by the social security contributions, so that your additional private insurance is hardly important for tax purposes. In total, this means that employees finance their share of social security largely from taxed income, while civil servants are not deducted by the notion of the fictitious social security contributions in the assessmentbe favored by their other pension expenses.

The discrepancy in the extraordinary burdens

In addition to the special expenses, taxpayers can also deduct extraordinary burdens, such as medical expenses or expenses for the maintenance of relatives in need. However, the tax authorities only grant this above a so-called reasonable burden. Every citizen is expected to bear a certain part of such costs himself. The amount of this hurdle depends on income andmarital status and moves in a single-digit percentage range. The higher the income, the higher the percentage of costs that the citizen himself has to bear before the state participates.

The lower hurdle for civil servants due to the fictitious gross income

When calculating this reasonable burden, the gross income is usually used as a basis. Here is another distortion in favor of the officials. The gross income of a civil servant is visually and mathematically lower than that of a comparable employee, since the employee’s share of social security is missing from the civil servant. This share is the case with the employeePart of the gross wage, not the civil servant. Since the reasonable burden is calculated as a percentage of this gross, there is an absolutely lower hurdle for civil servants. You can therefore claim your extraordinary burdens on a larger scale for tax purposes than employees who have a higher personal burden limit due to their higher arithmetic gross wages.

The pension allowance as a historical relic

A particularly obvious privilege for pensioners is the so-called pension allowance, which is deducted from their income. This allowance was introduced in the past as compensation for half of the employee pension contributions being paid by their employers and that these employer shares are tax-free for the employee. During this allowancerepresents a significant tax advantage for pensioners, which significantly reduces the tax burden, there is no comparable regulation for pensioners. This is all the more incomprehensible as pension and pension fulfill the same function of pensions, but are treated completely differently for tax purposes.

The gradual abolition and the ongoing protection of grandfathering

The legislature has now recognized this injustice and is planning to abolish the pension allowance as part of the adjustment of the taxation of old-age income. However, this is done with extreme slowness, which ensures benefits for affected people over decades. The allowance is reduced gradually over a period of time to the middlethis century is enough. In addition, comprehensive protection of the assets applies: Anyone who is already a retiree or will retire in the coming years does not have to accept any cuts and will keep their allowance for life.

The conclusion of the unjust distribution

This sluggish reform process means that the unequal treatment between pensioners and pensioners will continue to exist until the end of the century. It would have been an act of tax justice to immediately abolish this privilege or consequently extend it to pensioners. Instead, the injustice is cemented and at the expense of the general public and theemployees updated. The analysis clearly shows that tax law still protects old privileges in many places, rather than ensuring real equal treatment of all citizens in old age.