On the topic of the proposal aimed at reforming fiscal law by Paul Kirchhof

How is the proposal to reform German fiscal law put forward this year by Paul Kirchhof to be evaluated? Dieter Dziadkowski, a member of the country of origin committee and the Commission for Income Tax Reform (Bareis) stresses that the reform proposal represents an “integral work” that aims to simplify fiscal law and create an evenly distributed tax burden for German citizens. Flawed taxable base definitions in particular, which have arisen as a result of numerous exceptional circumstances and have led to excessive rates of taxation, are to be revised more appropriately, while the number of different types of taxes is to be reduced to four. In his opinion, an implementation of Paul Kirchhof’s proposal could lead to a real “major fiscal reform”, insofar as present decision-makers can finally bring themselves to improve fiscal policy despite the euro crisis. Franz W. Wagner from the University of Tübingen, on the other hand, is more sceptical. In his view the abbreviated law would replace the “code law”-based design principle of present fiscal law with a “case law” system and he questions whether this would contribute to a simplification of fiscal law. Undesirable allocative effects not previously present would arise from the continued existence of different methods of assessing income in terms of the scope and periodization of the taxable base. Ultimately, the planned low income tax rate of 25% would also primarily lead to positive results for high income earners. Rolf Peffekoven from the University of Mainz sees major problems in the potential implementation of the Kirchhof model with regard to value added tax, for example, arising due to EU legal restrictions. He also points out that the intended reform would primarily offer tax breaks for high income earners. They would be offset by significant additional burdens on value added tax, which would primarily affect lower income earners.