It’s the question almost everyone who works in Germany asked upon receiving their first payslip: “Where the #&#% did all my money go!?” And it seems we have good reason to be indignant: a recent OECD study has found that, taking both income taxes and social security contributions into account, no other industrialised country in the world places such a large financial burden on its citizens. 

Germany places highest burden on citizens’ wages

According to the OECD’s annual “Taxing Wages” report, Germany has finally displaced Belgium as the world leader when it comes to wage taxes. Not one of the other 36 member countries has an income tax and social security burden higher than Germany’s, which averages at 39,3 percent. 

The OECD average is 25,9 percent. This means that single workers in Germany receive, on average, 60,7 percent of their wages, compared to 74,1 percent on average in the OECD. 

Families receive substantial tax benefits in Germany

Families in Germany, however, take home more of their pay, with a married single earner with two children recording a total burden of around 20 percent in 2019, including tax breaks and payments such as child benefits. This puts Germany only in the upper midfield, behind Lithuania, Denmark, Finland and the Netherlands. 

If you look at families where both partners are working, things look different again. According to the study, a family with two earners and two children loses a good 31 percent of their income to taxes and social security contributions - putting Germany in the top spot in the OECD, just ahead of Denmark on 30,7 percent. The OECD average is less than 20 percent. 

The above-average burden in Germany is caused primarily by social contributions. If you take income tax on its own, Germany deducts 19,2 percent, only slightly more than the OECD average of 15,9 percent. Social contributions, on the other hand, make up a full 20,1 percent - double the OECD average of 10 percent.

Study’s findings will fuel debate on taxation in Germany

The study’s findings are likely to have implications for the ongoing dispute in Germany over taxation and the economic fallout of the coronavirus crisis - which the government claims it is able to fight, thanks to its substantial cash reserves. Nonetheless, many are calling for taxes in Germany to be cut to create more scope for investment and entrepreneurship.

You can read the full study, with detailed country breakdowns, on the OECD website.