Taxes for the rich: fraud costs billions while citizens' money fights for everyone!

Taxes for the rich: fraud costs billions while citizens' money fights for everyone!

In Germany, the federal government's plans to combat social benefit abuse are at the center of discussions, while at the same time the state's high debt remains a pressing issue. Chancellor Friedrich Merz and his coalition want to take measures against the abuse of social benefits, with Labor and Social Affairs Minister Bärbel Bas (SPD) wanting to take decisive action against “mafia-like structures” in citizen’s money fraud. According to current estimates, the savings potential from citizen's money fraud could be around 260 million euros, although this falls short of the savings that the state achieves by not using social benefits.

The misuse rate for citizens' money is around 4%, while non-use reaches an alarming 35 to 70%. These debates about benefit abuse also help promote the “welfare parasite” narrative, which harms the welfare state and weakens workers’ bargaining power. Management consultants express fears that such a focus distracts from the real problem areas, particularly tax evasion by very rich people, which amounts to an estimated 10 to 15 billion euros per year.

Tax evasion and its consequences

One of the prominent critics of the current discussions is the ex-millionaire Sebastian Klein, who is calling for more staff for tax investigations and the tax offices in order to effectively counteract tax evasion. He emphasizes that taxes have a massively distorted image and are viewed by some parts of society as anti-business. However, these funds flow back into the community and are indispensable for the state.

An example of the problem of tax privileges is the change in the law that reduced taxes on BMW CEO Susanne Klatten's profits from 60% to 30%. The lack of collection of wealth tax, which is anchored in law, is another topic that receives little attention in current discussions.

Citizens' money and social prejudices

In parallel to the discussions about tax evasion, citizens' money is also being discussed. After exploratory talks between the Union (CDU/CSU) and SPD, Germany is planning changes to citizens' benefit in order to strengthen job placement and promote faster integration of able-bodied people into the labor market. The debate about abuse of social benefits arises not only internally, but also with regard to people living abroad.

Tax expert Florian Köbler emphasizes that the financial losses caused by tax evasion are far higher than those caused by citizen's money fraud. In 2022, citizen's money fraud amounted to around 272.5 million euros, while tax evasion costs the state over 200 billion euros annually. Around 70 billion euros of these evaded taxes come from cash-intensive industries and false tax returns. To meet these challenges, Köbler calls for the use of artificial intelligence (AI) in tax investigations and proposes abolishing tax returns for employees with only employee income, inspired by successful models in Scandinavian countries.

Discussions about citizen's money fraud thus distract from the urgent need to address the much larger issue of tax evasion and show that a balanced debate is necessary to address the real challenges in the social and economic sectors.

For more information on this topic, you can read the reports from fr.de and giessener-anzeiger.de read.