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27-31 August 2019
Poznań, Poland
Europe/Warsaw timezone
programme last update: 23 August 2019
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Contribution Paper

Poznań, Poland - Morasko Kampus, room: 3.106

Failed reciprocities: how (self-)exclusion from public social insurance undermines acceptance of taxes.


  • Dr. Sylvia TERPE

Primary authors


The contribution will shed light on two mechanisms which undermine small business owners’ acceptance of taxes in East Germany. The tax system and the different public social insurance systems are – by and large – not related to each other; but many small business owners make a connection between these systems. For understanding the first mechanism, it is important to note that around three quarters of firms in Germany are either sole proprietorships or partnerships. In contrast to corporations, owners of these firms do not pay the flat corporation tax (15%), but their profits are taxed like any other income with the progressive income tax (up to 42%). However, owners of these firms do not feel like employees with a ‘normal’ income. They emphasize that in case of business failure they do not receive unemployment benefits (for which they actually do not and cannot make contributions), and are personally liable with their private possessions. The second mechanism refers to their status in the public pension and health care schemes. In these systems they are treated as ‘self-employed persons’. Because the conditions applied to them are perceived as worse than in private insurances, many of them switch to the latter. In both mechanisms, the (self-)exclusion from public social insurances seems to undermine the acceptance of taxes. By strengthening a meaning of self-employment as the ability to care for oneself in every sphere of one’s life, these mechanisms reduce the willingness to pay taxes for the benefit of the state or others.