Bible Encyclopedias
German Finance

Revenue

Expenditure

191

2,350.8

8,653.8

1915 .

. .

.

.. .

1,735.2

25,708'4

1916 .

. .

.

.. .

2,029'4

27,740'9

1917 .

. .

.

.. .

7,830.3

52,015.4

1918 .

. .

.

6,795.0

44,030'7

Nothwithstanding these considerable amounts, and the increased revenue obtained through other forms of taxation, the German war budget was a most unfavourable one. The appended table gives the total revenue and expenditure of the Empire for the years 1914 to 1918, and, as already stated, a great part of the actual war costs are not included in the expenditure, as it only appears in the accounts for the years following: Revenue and Expenditure 1914-8 (in millions of marks). The war was financed, almost entirely, by an enormous increase in indebtedness, at first through issues of loans, and later, in ever-growing measure, through increasing the floating debt. The taxes and levies introduced during the war were barely sufficient to meet the current requirements, greatly increased through the interest on the debt as well as through decrease of revenue from peace-time sources. As far as the property and income-tax is concerned these were not permanent sources of income but were only available once, and terminated as soon as their result was obtained. But the expenses remained, and necessitated imperatively the replacement of the single levies through regular sources of revenue.

After the War

It was in this desperate situation financially that the war came to an end. The collapse which followed it, together with the crushing conditions of the Armistice and the Peace Treaty, disorganized the whole economic and financial life of the country. The effect of the war appeared after the defeat with frightful clearness. Of the German population 1,700,000 were killed, 1,50o,000 injured and thus had their capacity to gain a livelihood impaired. And the civil population, through the physical and moral strain of the war, showed a greatly increased mortality; more especially, countless children and old people were victims of the privations imposed by the blockade. The increased mortality of the civil population in 1914-9 is estimated at 800,000 souls. A still heavier blow was the fall in births through the separation of the sexes in consequence of the war. For the period of six years this reduction amounted to 3,700,000. Besides actual losses in numbers, there was also exhaustion of those who remained alive and the destruction of the means of productivity.

Superficial critics have been apt to observe that Germany itself was saved from the ravages of the war, since it was fought, with the exception of a short incursion of the Russians in East Prussia, outside its frontiers. Herein lies a fallacy. The German industrial works were not indeed destroyed, but the greater part of the machinery and plant was used up to the utmost by war production without there being a possibility of seeing to repairs and renewals. Similarly, the agricultural areas were exhausted. Industry and commerce had lost the materials that were used up in the war; cattle had gone from the stalls; transport undertakings were crippled to an incredible extent. At the end of March 1920 only 45.9% of the existing locomotives were usable, whereas at the end of July 1914 the number under repair was only 19.1%. Germany in the late autumn of 1918 was not only in a state of military defeat and political chaos; financially and economically it was at its last gasp. What was needed was help from abroad, through importation of foodstuffs and raw materials, which alone could facilitate a transition from war to peace conditions. A complete change in the direction of its productive energies was required. During the years of war production was solely for war requirements, the Government being the sole big buyer, always eager for goods; when the demand for war requirements stopped suddenly it was necessary again to produce for peace requirements, and to find a market for them. First and foremost there was the task of again taking into the labour market the millions of people released from the army and of finding places for them in agricultural and industrial undertakings, in the works and factories and offices. Elaborate plans for this demobilization of the army had already been made during the war. They were, as so many other schemes, rendered useless by the destructive conditions of the Armistice. The periods fixed for the return and release of the army were too short, and all organization in that direction collapsed. The enormous supplies taken for the army, the value of which was estimated at several milliards of gold marks, and the return of which was imperative for the use and nourishment of the people during the first part of the period of transition, could not be stored in the given time. Moreover, Germany had to deliver up to the Allies 5,000 engines and 150,000 wagons, and the transport crisis already threatened was thereby rendered complete. In accordance with the supplementary conditions of March 1919 Germany had to hand over the biggest part of its commercial shipping, and this again greatly increased the difficulties of distribution. Worse still, the blockade still continued for months, and thus there was the severest restriction of imports of necessary provisions and raw materials, for which also only inadequate means of payment were available. Terrible were the results of these regulations. Not only was the political and social crisis rendered more acute, but the German economic position was disordered to such an extent that repeatedly a total collapse seemed unavoidable. The result was the loss of hundreds of thousands of lives among the civilian population, whose weakened condition was unable to withstand the continued privations. According to an estimate based on 375 German towns of 15,000 inhabitants and over, as against 140 deaths per io,000 in 1913 there were 175 deaths in 1919 and 158 in 1920. The mortality from tuberculosis alone was increased from 15'7 in 1917 to 27.1 in 1919, and in 1920 it was still as high as 18.4. That was not all. With the Armistice began the Allied occupation of the left bank of the Rhine and the bridgeheads on the right bank. A difficult economic situation was thus produced, which again became peculiarly acute in the spring of 1921 through the London " sanctions," for Germany lost control of her most important customs frontier; the " hole in the west " was torn open, and a flood of foreign goods, to the value of milliards of marks, poured without regulation or control into the starved country, aching for commodities of all descriptions. Whilst the German population was without the means to satisfy its re quirements in absolute necessaries, the country was flooded with foreign articles of luxury. Although masses were facing starvation, the carrying-out of the conditions, first of the Armistice and later of the Peace Treaty, permitted the classes which had profiteered out of the war and the revolution to satisfy their vulgar greed.

The Peace Treaty of Versailles, as adopted by the Allies in May 1919, and imposed on Germany by the threat of renewing the war, completed the work of economic ruin. Germany lost with its territories a total population of 5.3 million souls. With Alsace-Lorraine, moreover, Germany lost nearly threequarters of its capacity for iron production; out of pre-war deposits of iron ore valued at 2.3 milliards of marks in Germany and Luxemburg (which had a customs treaty with Germany), there remained a value of only 0.403 milliard within the new German frontiers. Germany also lost with Alsace-Lorraine 26% of its potash. It lost with the transfer of the Saar valley to France roughly 9% of its pit-coal production, and was also obliged to agree to deliver to the Allies large quantities of coal, fixed in Oct. 1920 in Spa at 2 million tons per month. It was threatened with the loss of Upper Silesia, which had produced 23% of German pit-coal, 80% of zinc and 61% of raw zinc. Germany lost, moreover, almost all its commercial shipping, all overseas cables, its colonies, - in fact all the bases of its commerce abroad. Germany lost in the N. and the E. of its empire large agricultural districts which had formerly furnished about 25% of its supply of grain and potatoes, and io to 12% of its cattle. And while the Peace Treaty thus raised for Germany the crucial question whether it would be at all possible in future to supply a population now amounting to 61 million souls with nourishment and occupation on German soil - whether indeed within its new frontiers it was not really a case, from the economic point of view, of "20 million souls too many " - the country also found itself burdened with external financial obligations of unexampled magnitude by way of reparation payments to the Allies.

The Depreciation of the Mark

The first effect of the defeat, - the internal collapse, and the terms of the Armistice and the Peace Treaty, - was the almost total breaking-down of the German currency system. The depreciation of the mark abroad had pursued a progressive course already during the war. In consequence of the blockade, and of increasing demands for war requirements in industrial production, German exports had declined much more quickly than the imports; and since the cover formerly available for excess of imports, arising from shipping charges, freights, etc., failed entirely and foreign investments were largely unrealizable, it was almost impossible to obtain credit abroad, which in normal times would have covered the deficit. By the end of the second year of the war (summer of 1916) the exchange in Switzerland, for instance, had fallen from a normal rate of 12 3.4 6 francs per 100 marks to 95.60 francs, showing a loss in exchange of 22.60%. Though depreciation still went on, in Oct. 1918 the Swiss rate was still as much as 71

50 francs and the loss in exchange not more than 42.10%. But after the end of the war the fall became steeper. The Swiss exchange was 622 francs per loo marks at the end of Nov. 1918, and the rate descended month by month to 352 francs at the end of May 1919, and then, after a brief reaction, to 26 francs at the end of Sept. 1919, 11.50 francs on Dec. 31 1919, and 6.15 francs (equal to a loss of 95%) at the end of Feb. 1920. From this point there was again a reaction in the summer of 1920, and on May 31 1920 the Swiss rate was 14.75 francs, but in the autumn of 1920 the depreciation recommenced, and towards the end of June 1921, the Swiss exchange for loo marks was 8

10 francs. (See Exchanges, Foreign, for the German exchange.) German currency depreciation during the war, as well as afterwards, was one of the factors which restricted the possibility of getting help from foreign capital. And though the value of money in Germany itself declined much more slowly than the mark exchange abroad, another result was that foreign purchasers were able to buy whatever was obtainable in Germany, stocks of goods and merchandise, town property, securities, plant and machinery, up to complete industrial enterprises, at catastrophically low prices. Another consequence was an enormous increase in German indebtedness towards foreign countries. The German mark note became the gambling counter of the world. The German notes went abroad in milliards at everfalling rates in payment for imported goods, to be bought up by big and little speculators, down to the hotel porter and the domestic servant who hoped to profit by any rise in exchange. Enormous foreign holdings of mark notes resulted also from credits given by banks in marks, also with an eye on an improvement in the exchange. Only in this way was it possible for Germany to pay for its large excess of imports over exports, which marked the destruction of Germany's economic position in these years of greatly reduced production at home. The price was a foreign indebtedness, the yearly burden of which in interest charges was estimated at the end of 1920 by competent judges at one milliard gold marks and by some critics at an even larger figure.

Apart from all other difficulties attending economic reconstruction after the war, every attempt of Germany to reach a real internal consolidation was hampered by the monetary instability. On the one hand it raised prices, and on the other it depreciated the value of property and income. While, towards the end of the war and just after, wages had often been increased beyond the rise in prices, so that a moderate increase in real wages resulted to the worker, it was not possible to continue this for any length of time in view of the unhappy state of production. Much less was it possible for people enjoying fixed incomes, officials, civil servants, and brain-workers, to increase their income in proportion with the reduction of money value, and they sank lower and lower in the social scale. The worst sufferers were people relying on incomes from rents. Every reduction in the value of money amounted to a favouring of the debtor at the expense of the creditor. Those who had invested their capital in Government securities, mortgages, etc., at fixed rates of interest, were helpless against the reduction in money value, which reduced their capital as well as the interest to a fraction of its former amount. Producers themselves might be able, through the rise in prices, to obtain some compensation for the reduction in the value of money. But any such compensation could only be reached by a very small part of the population. No doubt, as in all periods of economic revolution, some lucky people found the means of enriching themselves to an extraordinary extent. But the high profits nominally realized by many German companies, if the amount were reduced to the actual value of money, represented not only no advantage, but a loss if compared with pre-war times. The large middle class was hit particularly hard. This class, the main repository of national culture, was in danger of being swallowed by the proletariat.

Such a situation was bound to influence the State finances to a deplorable extent. Whatever services were required had to be paid for at a nominally higher rate. It was necessary too to spend enormous sums on subsidies for reducing the price of necessaries to the public, for keeping down the cost of transport, and for the relief of the unemployed. On the other hand, uneconomic State finance was itself a factor in the decline of money values. The State had to cover its financial requirements in default of taxation by further issues of paper money, increasing from week to week and month to month.' It was itself the producer of the artificial purchasing-power which brought in its train the continued rise in prices. The bank-note press, in substitution for the taxation machine, created a continually growing inflation. It was the uninterrupted use of the printing-press, as a means of meeting the expenditure, that characterized State finance in the first years after the collapse.

Taxation Reform,1919-20

The National Assembly of the new German Republic had to face the task of laying the foundations of a new financial system and re-creating it out of chaos. The old privileges of the separate states of the Empire, in depriving the central Government of the benefit of the most important sources of tax-revenues, had to go. The German Reich now had 1 On Jan. 1 1919, the regular note issue amounted to 22,188 million paper marks (as against 11,467 millions a year earlier) and the loanbank note issue to 10,109 millions (6,264 millions in 1918). On Jan.

I 192 the total was about 120,000 millions.

to bear by far the largest part of the costs of the war, the interest on the war debts, the war pensions and compensations, the whole of the burdens of the Peace Treaty, etc.; these swelled the budget expenditure to such an extent that the requirements of the individual states were left far behind. The great sources of direct taxation had now to be made free for obtaining revenue for the Reich. Events had made compulsory a strong centralization in German finance. By an order of the Finance Department of the Reich on Sept. 10 1919, the management of all fiscal levies was handed over to the central Government. A further order, of Dec. 13 1919, provided for the formal right of taxation. A decisive step was taken in the National Taxation Law of March 22 1920, which fixed on a new basis the position of the three great receivers of taxes, the Reich, the individual states, and the subordinate local Governments towards each other. Whereas the pre-war rule was that the use of certain sources of taxation by the individual states forbade the Imperial Government to use such sources, the new regulations reversed the position, ruling that the use of certain sources of taxation by the Reich forbade the collection of similar taxes by the individual states and local communities unless expressly empowered to collect a supplementary levy. Counties and municipalities kept their most important independent tax sources-the taxes on landed property and industrial activities. They were obliged to levy an amusement-tax, and were entitled to tax the lowest incomes which escaped the general income-tax. In principle they became pensioners of the State, receiving of the revenue from Reich taxation two-thirds, of the companies-tax also two-thirds, of the inheritance-tax one-fifth, of the tax on acquistion of landed property one-half, and of the turnover-tax 15% (i.e. Io % for the counties and 5% for the municipalities). This was a most important step in the direction of laying a sound basis for Reich finance.

In the place of the various tax departments of the individual states there had to be created the gigantic machinery of a central Finance Department for the entire Reich. It could not come into existence without much early trouble and failure. The new department was at first quite unable to carry out the regulations, and only slowly and gradually came the introduction and collection of new taxes. And another difficulty followed quickly in consequence of the new regulations for financial management. The unification of the railways in Germany had been, like the unification of taxation, an old demand, but one which could not be carried out in times of peace, when the railways were a valuable source of revenue to the states, more especially to Prussia. Now it was accomplished, and the Reich, which previously had managed only the railways of AlsaceLorraine, from April 1 1920 took over all the railways. But the railways, instead of bringing in a profit, now found themselves with a deficit. From the moment, however, that the Reich had taken over the important sources of tax revenue, it was obliged to take over the railways as well, since the individual states were not able to carry their losses, and these losses now fell on the Treasury of the Reich.

With this basic change in organization came now the extension of the field of taxation. Between Sept. 1919 and March 1920 a system of new taxes for the whole Reich was created. The taxation of income was catjied out in three different ways.

Amount of Income For part or the whole of the first 24,000 marks. For every additional (whole or part) 6,000 " 5,000	Rate per cent 10 20 25
5,000	30
5,000	35
5,000	40
70,000	45
80,000	50
200,000	55
" all further amounts .	60 First comes the unified tax on income, which came into force on April 11920. The rate of taxation is as follows: Thus, 60% of any income exceeding 400,000 marks (now paper marks) has to be handed over as tax to the Treasury. On an income of 30,000 marks the tax is 3,600 marks; on 50,000 marks it is 10,000 marks; on 200,000 marks it is 81,600 marks; and on i,000,000 marks it is 551,600 marks. A reduction in these rates is allowed only in so far as an existence minimum and the numbers in the family are taken into consideration. This is arranged so that, for every person subject to pay tax and for each member of his household not independently taxed, the taxable amount of income is reduced by 120 marks, provided the dutiable income does not exceed 60,000 marks, and by 60 marks where the income is between 60,000 and ioo,000 marks. A married man subject to the tax, with four children and an income of 24,000marks, will, for instance, obtain a reduction of 720 marks. Taxation of those who receive salaries or wages is assured by making the employer answerable for retaining from the salary or wage a proportionate amount in advance and paying it over to the tax collector. To this income-tax, affecting the total income of the subject, is added, as super-tax, a levy on income from investments, in distinction from earned income, i.e. from dividends on shares, etc., interest on loans and mortgages of all kinds, interest on advances of any description, especially on deposits in banks and savings banks, rents, etc., and discounts on bills, including Treasury bills. The tax is ro % on the whole return on the capital. An exception is made only in the case of small investors over 60 years of age or incapacitated from work. These have the tax on returns from capital included in their income-tax, as follows: on an income of not more than 5,000 marks, the whole amount; up to 6,000 marks 90%, the rate being reduced with every further i,000 marks by io%. On incomes of over 14,000 marks this relief terminates. The third form of taxing incomes is the companies-tax, which operates as a super-tax on enterprises carried on by companies, including foundations, institutions and other societies for the management of property. This tax is ro % generally, on the total dutiable income. For societies working for gain (companies with shares, societies with limited liability, etc.) there is, in addition, a special tax on the distributed profit, calculated on the proportion of the distributed amounts to the capital, so that where the profit is only 4% on the capital the tax is 2% on the distributed amounts, rising by 1% up to Io % of the distributed amounts if the profit on the capital is 6, 8, It), 12, 14, 16, r8 and over. The first 3% of profit on the capital is tax-free. The total taxation on income, from the three forms of levy, works out as follows: Income from shares, for instance, is taxed under each of the three forms. The company itself has to pay on its income in proportion to its own liability; then the distributed profit is reduced by the io% tax on return from capital; and finally the shareholder has to pay income-tax on his dividends. following table (in marks) indicates its working:-- Increase in Property Amount of Tax 10,000 I,000 15,000 1,750 20,000 2,500 25,000 3,500 30,000 4,500 35,000 6,000 40,000 7,500 50,000 10,500 100,000 30,500 150,000 55,500 200,000 83,000 300,000 148,000 400,000 233,000 500,000 333,000 800,000 633,000 1,000,000 833,000 2,000,000 1,833,000 4,000,000 3,833,000 5,000,000 4,833,000 10,000,000 9,833,000 Taxation on property (capital) was also imposed in three forms. First of all came the war-tax (Kriegssteuer ) on property increase, which hits any increase of over 5,000 marks in the value of property during the war and immediately after the war (difference in property between June 30 1919 and Dec. 31 1913), nobody keeping a larger increase than 172,000 marks. The Through this war-tax increase in property is for the greater part annexed. But secondly, a further tax levied for the " need of the Reich " ( Reichsnotopfer ) makes a deep inroad on unincreased property, as calculated on Dec. 31 1919. This affects companies, especially companies with shares, and other societies for gain, on their net property, that is without the paid-in capital and without reserve funds intended for general utility or benevolent objects, at a rate of io%. It also applies to the property of individuals, leaving only a property of 5,000 marks tax-free, though in the case of married couples this is increased to Io,000 marks tax-free, and, for those who have children, a further amount of 5,000 marks tax-free is allowed for the second and each additional child. Consideration is also extended in the case of proprietors of industrial enterprises who are liable to be hampered by the depletion of capital, the capital employed in the business being calculated not to the full amount but only up to 80% of its value. First 50,000 marks (in full or in part).. . io Next 200,000 marks 500,000 " 35%o 40 Next 50,000 marks . 12 500,000 45 " 100,000 " . 15 1,000,000 . 50 " 200,000 " 200,000 20 25 2,000,000 " 2,000,000 " 55 60 " 200,000 " 30 All further amounts . . 65 Taxable property Amount of tax Taxable property Amount of tax 1,000 marks loo marks 350,000 marks 56,00o marks 5,000 500 400,000 66,000 " 10,000 " 1 ,000 450,000 " 78,510 " 15,000 " 1,500 500,000 91,000 " 20,000 " 2,000 " 550,000 103,500 25,000 " 2,500 600,000 116,000 " 30,000 " 3,000 650,000 " 131,000 " 35,000 3,500 700,000 " 146,000 " 40,000 4,000 " 750,000 161,000 " 45,000 4,500 800,000 176,000 " 50,000 5,000 850,000 193,500 " 55,000 " 5,600 900,000 " 211,000 60,000 6,200 950,000 228,500 " 65,000 " 6,800 1,000,000 246,000 70,000 7,400 " 1,500,000 446,000 " 75,000 " 8,000 " 2,000,000 " 671,000 " 80,000 " 8,600 " 2,500,000 921,000 " 85,000 " 9,200 " 3,000,000 " 1,171,000 " 90,000 " 9,800 3,500,000 " 1,446,000 95,000 .10,400 4,000,000 " 1,721,000 " 100,000 " II,000 " 5,000,000 " 2,271,000 " 150,000 18,500 " 6,000,000 2,871,000 " 200,000 26,000 7,000,000 3,471,000 250,000 " 36,000 " 8,000,000 4,121,000 " 300,000 46,000 For each additional 1,000 marks 650 marks more The rate for individuals is as follows: This works out as set forth in the following table: The tax has to be paid in cash or in war loan, but may be paid in yearly part payments, the unpaid amount being charged 5%, and it must be paid off within 26 years. If real property is given as security, where the payment is secured by entry in the official register 46 years are allowed for payment. The third form of property-tax, inheritance duty, consists of a considerable extension of the former inheritanceand gift-tax, with the addition of a succession-tax after the pattern of the English estate duty. Inheritanceand gift-tax are calculated under six classes, according to the relationship of the beneficiary: Class I-Wife or husband and children, including illegitimate children recognized by the father. Class 2-Descendants of the children. Class 3-Parents, brothers and sisters. Class 4-Grandparents, descendants of first degree of brothers and sisters, parents-in-law, step parents, children-in-law, step children and adopted children. Class 5-Descendants of second degree of brothers and sisters, brothers and sisters of the parents, brothersand sisters-in-law. Class 6-Other beneficiaries (except as regards communities, churches, benevolent and utilitarian societies, foundations, etc., in which case the rate is always io %). Class I Class 2 Class 3 Class 4 Class 5 Class 6 For first 20,000 marks tax- able part or full. . 4 5 6 8 io 15 For following 30,000 marks 5 6 8 10 12 20 50,000 " 6 8 10 12 15 25 50,000 " 8 10 12 15 20 30 50,000 " 10 12 15 20 25 35 100,000 " 12 15 20 25 30 40 200,000 15 20 25 30 35 45 250,000 20 25 30 35 4 0 50 250,000 25 3 0 35 40 45 55 500,000 " 30 35 4 0 45 50 60 All further amounts. . 35 4 0 45 50 60 70 The following are the rates of the tax per cent for the different c)asses, an allowance, however, being made for 5,000 marks being tax-free for the first five classes, and Soo marks for the sixth class: The highest rates apply where the taxable benefit exceeds one and a half million marks. The tax increases by i % of the amount; that is, if the already existing property of the beneficiary is Ioo,000 marks but not over 200,000, for each Io,000 marks; where the existing fortune exceeds 200,000, for each 20,000 marks. The increase must not exceed 100% of the tax. The total of the inheritance duty must not exceed 90% of the benefit. For a legacy arising before April i 1935 the tax is reduced i % for each year down to April i 1925, and for each earlier year 2%. Reduction down to March 31 1921 is therefore 20%. The succession duty (estate duty) is calculated solely on the property which has been left, without reference to relationship or number of beneficiaries; it applies to landed property, business capital, and personal property in so far as it exceeds 50,000 marks. The tax does not apply to gifts between living persons. The rate of tax is, for the first 200,000 marks (part or whole), i %; for the following 300,000, 2%; for the following 500,000, 3%; for the following i,000,000, 4%; and for further amounts 5%. If the value does not exceed 200,000 marks the first 20,000 marks are tax-free. It is necessary to consider the effect of all these taxes together on property and income, to obtain a clear idea of what the burdens mean. At the Brussels Conference of 1920, the German Government submitted to the British delegates a statement which gives examples in explanation: Example No. i.-A private individual with property worth on June 30 1919 100 million marks, showing an increase of 25 millions, dies in 1920 and leaves his property to two nephews in equal shares. One nephew has no property, the other has property stated at one million marks. Taxation on the too millions is as follows: (I) War-tax on increase. 24,828,000 marks (2) " Need of Reich " levy, on balance of 75,172,000 marks.. . (3) Succession duty on property (27,392,450 marks) (4) Inheritance duty to be paid by nephew who has no property (5) Inheritance-tax to be paid by nephew who has property of 1,000,000.. 7,548,367 " Total taxation. .. .. .. 86,520,784 marks There remains, of the original property of 1[00,000,000, only 13,479,216. Example No. 2.-A private individual has property worth 10,000,- 000 marks of which 4,000,000 are from shares in a company for gain, which could have paid in 1920 a dividend of 20%, if it had not 'been obliged to pay companies-tax. The rest is landed property, returning 5%. There is no increase in property. Without taxes this person would have an income of 1,100,000 marks per annum. The " Need of Reich " levy exacts 5,417,750 marks, leaving 4,582,250 marks. The untaxed income on this would be 800,00o marks from dividends and 29,112 marks from rents, or 829,112 marks. This is reduced by 160,000 marks for companies-tax, 64,000 marks for return on capital, and 315,160 marks for income-tax, leaving an income of 289,952 marks. Example No. 3.-A private individual has property worth 1,000,000 marks; no war profit. Property rented out brings 5%. One-third of the " Need of Reich " levy (244,250 marks), 82,250 marks, is paid, leaving a balance of 162,000 marks, on which there is 62% interest to pay. On the remaining property, 917,750 marks, the income is 45,887 marks. Out of this there is to be deducted :- 62% on 162,000, 10,530 marks; return on capital-tax, 4,588 marks; income-tax, 7,272 marks; or 22,390 marks in all, leaving the remain 47,779,550 1,332,622 5,032,245 ing income at 22,497 marks. This person, who before the war, after deduction of tax, had an income of about 45,000 marks (or say £ 2,250), had thus, in 1920, after deduction of taxes an income not merely reduced by half, but, in view of the depreciation of money, no better than that of an ordinary working-man. The work of tax reform under the young German Republic was not exhausted by this extension of direct taxation. There was added a great extension of indirect and transport taxation. Its most important item was the tax on turnover. At first it consisted in a stamp duty of one per mille, rising in the last year of war to five per mille, but by the National Assembly's regulation of Dec. 24 1919, which came into force on Jan. I 1920, it was fixed at 12%. This turnover-tax is applied also to articles of luxury, specially mentioned, at a rate ten times increased, namely 15%. Further it includes a restaurant-tax, advertisement-tax, cloakroom-tax, etc., etc., and covers certain kinds of service such as letting-out furnished rooms, taking in advertisements, holding in trust money, securities, valuables and furs, letting riding horses on hire, the rate of tax being io%. It is to be noted that the normal rate of 12% does not represent the total amount, which really is very much higher on the average, and in the case of semi-manufactured and manufactured goods it has to be paid as many times as the commodity changes hands. The tax is therefore a real tax on consumption in the largest sense. Similarly, the coal-tax is collected at 20% on the value at the pit-head, and rises in proportion with the selling-rates. Various single taxes on tobacco, matches, playing-cards and sales of real property were also to be added, as well as repeated increases in the charges for letters, telegrams, postal-orders, trunk-telephone messages and railway rates. A gigantic increase of the burden of taxation on the whole of German national economy was the result of these reforms, though even then they were not sufficient to balance the budget of the Reich. f Funded debt (Treasury bonds Floating debt and interest- bearing (Treasury notes without interest) Total Treasury notes) March 31 1918 71.9 33.3 105.2 March 31 1919 92.4 63.7 156.1 March 31 1920 92.0 91.5 183.5 March 31 1921 78.3 176.6 244'9 Development of Reich Finance, 1919-21 The most significant feature of the financial position in these first years after the war was the rapid increase in the national debt. The figures each year were as follows, in milliards of marks: - The reduction shown in the funded debt in 1921 arises from cancellation by means of collection of war-tax and " Reich need " levy, and by the sale of army property. Against this the increase in floating debt in 1921 includes a part of the purchase price paid by the Reich on taking over the railways from the individual states, whilst, on the other hand, a number of other obligations are not included. If these are taken into consideration, and the Reich and the individual states are taken together, there appears for Oct. I 1920 a total debt of 294.8 milliards of marks, compared with 22 milliards 'on March 31 1914. The large increase of debt was the result of slow returns from the new taxation, the depreciation of money which continually caused a greater expenditure on Copyright Statement These files are public domain. Bibliography Information Chisholm, Hugh, General Editor. Entry for 'German Finance'. 1911 Encyclopedia Britanica. https://www.studylight.org/​encyclopedias/​eng/​bri/​g/german-finance.html. 1910. terms of use • privacy policy • rights and permissions • contact sl • about sl • link to sl To report dead links, typos, or html errors or suggestions about making these resources more useful use the convenient contact form StudyLight.org © 2001-2022 Powered by Lightspeed Technology Ads FreeProfile