German tax revenues could rise with prostitute levy

German tax revenues could rise by about €1.4 billion a year if there were a more efficient system of taxing prostitutes, whose work is mostly legal, according to an economist.

Richard Reichel estimates sex workers generate about €7 billion each year in Germany's "red-light sector" and that most of that goes untaxed.

"About €1.4 billion could be expected," Mr Reichel told yesterday's Die Welt newspaper about his study "Prostitution - The Unrecognised Economic Factor".

Many prostitutes working outside brothels under-report or do not report income. Few pay taxes.

Mr Reichel, an economist at the university of Erlangen-Nuremberg, said the income tax rate on prostitutes should be on average about 20 per cent. He assumes two-thirds of the prostitutes in Germany have income under €2,000 per month.

When the cities of Cologne and Berlin introduced flat daily tax rates on prostitutes revenues soared and German Finance Minster Peer Steinbrueck recently floated the idea of a nationwide daily flat rate tax for prostitutes.