Why Bert Rürup demands more attention for the sales tax

In discussions about tax increases, one aspect is often overlooked: Which taxes have which side effects? Bert Rürup, the chief economist of Handelsblatt, makes it clear in his contribution why the value-added tax – which generates over 300 billion euros in tax revenue – must receive more attention in the discussion about tax increases.

“Tax changes always lead to adjustment reactions. Higher taxes on wages make leisure more attractive, higher taxes on corporate profits reduce the propensity to invest with profitability and promote capital outflows. Therefore, among economists, a higher sales tax is considered the lesser evil when the state wants to generate additional income and cause as little overall economic damage as possible. Consumption taxes cannot be avoided in the long term by legal means, unless saving is an end in itself or serves inheritance. Moreover, the sales tax does not burden exports and thus international competitiveness. In addition, the standard rate of this tax is higher in most EU countries than in Germany with 19 percent; the EU average is 21 or 22 percent, in Sweden, Denmark and Croatia it is 25 percent.”

– Bert Rürup, Chief Economist of Handelsblatt, in “Sales Tax – Popular with Every New Government”, Handelsblatt, October 4, 5, 6, 2024, page 21, No. 192