Germany's Smut Tariff Sex Tax Filling Cologne's Coffers

Cologne's sex tax is proving to be a resounding success. In its second year it brought the city hundreds of thousands of euros in revenues. But calculations suggest that not everyone is being entirely honest with the tax authorities.


Germany's economy is finally picking up again, and tax revenues are increasing as a result, rising over 8 percent in November, according to a report in the business daily Handelsblatt on Friday.

A sex worker at the 'Pascha' brothel in Cologne. The city is enjoying booming takings from its new 'sex tax'.
DDP

A sex worker at the 'Pascha' brothel in Cologne. The city is enjoying booming takings from its new 'sex tax'.

And one particular sector of the economy is generating plenty of fiscal revenue, at least in the city of Cologne -- prostitution. The city's so-called 'sex tax' brought in revenues of €828,000 in 2006, a municipality spokesperson told the news agency ddp. The year's takings represent a significant increase over 2005, when revenues were €790,000.

Although prostitution is legal in Germany, Cologne is the only city that has a specific sex tax. The tax, which is levied on prostitutes, strip shows, pornographic cinemas, and massage parlors, was introduced by the city in January 2004 in an attempt to balance its budget, and caused headlines worldwide.

Each prostitute is required to pay €150 each month into the city's coffers. However, those who only work part-time can opt to pay €6 per day worked instead. As a result, sex workers voluntarily inform the tax office when they are ill or on vacation, the spokesperson said.

The flat-rate tax is unusually regressive for Germany, which generally taxes high-earners heavily, as it disproportionately affects low earners. However, the highly transparent tax at least means sex workers are less in need of the services of members of arguably the world's second-oldest profession, namely accountants.

There is likely to be increased international attention to the German approach to prostitution as a result of the recent murders of five prostitutes in the British city of Ipswitch. In an editorial in its Friday edition, the business daily Financial Times called for brothels to be legalized in the UK to increase safety for sex workers.

However, it appears that not all of Cologne's sex workers are being entirely honest with the tax authorities. According to one widely-quoted estimate, there are 400,000 prostitutes working in Germany. With Cologne's population of 986,000 representing about 1.2 percent of Germany's 82 million people, that would suggest the city should have approximately 4,800 prostitutes, assuming that prostitution is equally distributed across the country. (Given the city's liberal reputation, the true figure is probably higher.)

The tax office was not able to give an authoritative figure on the actual number of prostitutes in the city, as each tax number could represent an individual prostitute or an entire brothel. However, the figure of €828,000 is equivalent to a total of 460 prostitutes each paying €150 a month. Even accounting for the fact that some prostitutes only work part-time, there appears to be a significant number of tax evaders.

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