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The average gross earnings of full-time employees in the manufacturing industry, trade, credit and insurance sectors are approximately EUR 2,900 a month in Germany. Full-time employees in the service sector earned on average EUR 2,700 gross a month. White-collar workers earn on average EUR 3,700, blue-collar workers around EUR
2,500. Substantial differences remain between western and eastern Germany. In the new Federal Länder, workers are paid a third less on average. There also continues to be inequality between the sexes. Women in comparable positions earn considerably less than men.
Anyone living in Germany as an employee and receiving an income has to pay taxes. Individual living conditions are taken into account in calculating taxable income. The taxation criteria are set out on the wage tax card issued by the municipality on the basis of its documentation (e.g. index of residents) for each calendar year. Single people have to dig deepest into their pockets. Anyone who is married, is also the sole earner and has children is treated much more leniently under tax law. Anyone who earns less than EUR 7,664 a year need pay no tax. Income above this level is taxed at a progressively rising tax rate. At the lower end of the progressive tax band, which begins at annual pay of EUR 7,664, a tax rate of 15% applies (= starting tax rate). The tax rate then rises, initially relatively steeply, to around 24%. As from an income of EUR 12,740 the tax rate does not increase further and even in the case of considerably higher incomes remains at 42% across the board.
The employer withholds the income tax for each wage payment and pays the tax directly to the tax office. Everyone in employment is required to make a contribution towards social security. Contributions are paid half by the employer and half by the employee. Between 19% and 19.5% of net wages/salary is withheld as social security contributions. At present the solidarity surcharge introduced in 1995 to build up the east German economy amounts to 5.5% of wage/income tax. Church tax of 8% to 9% is also levied.
At the end of the year, every taxpayer must submit a tax return to the tax office. Other forms of income (savings, capital gains etc.) must also be declared.
Value-added tax on the acquisition of goods and the use of services varies between 7% and 16%. As of 2007 it is to rise to 19%.
Text last edited on: 11/2006
Source: European Union
© European Communities, 1995-2007
Reproduction is authorised.
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