Bonn, Germany Taxes Prostitutes with Nightly “Parking Permits.” A Deadweight Loss?

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In Bonn, Germany, brothels and saunas pay taxes. Yet street prostitution is not taxed, so that the government has given streetwalkers a competitive advantage. To ensure fairness, the Bonn government has constructed meters along the main streets where the women solicit, with each woman required to purchase a “parking permit” of €6 each night.

As an economist, I would prefer to see hourly fees charged, but the costs of administering a fixed fee are much lower and probably yield greater net revenue. The only problem is that the fixed fee gives an incentive to shift work time toward fewer nights per week but more hours per night worked.  A clear deadweight loss from this tax.

[HT to DJ]

 

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  1. Jake says:

    I found it interesting that city was spending $116k a year on security for streetwalkers and they only have about 20 streetwalkers (neary $6k per year per streetwalker) In addition they have built them specialized garage stalls for their work.

    It is funny that they are worried about fairness in taxes when they are heavily subsidizing streetwalkers when compared to the brothels & saunas

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  2. jona says:

    They should probably require some sort of street walker lisence and just implement the tax that way. It would eliminate the incentive to work less days. It would also put cash in the government coffers in lump sums instead of having to collect it on a daily basis making collection easier and cheaper, even if it raises the cost of entering the streetwalking business. I assume they already have to hold some sort of lisence that states they take STD tests regularly anyways… right?

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  3. keith says:

    Street walkers have no advantage over anyone.

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  4. that_guy says:

    I wonder if she knew she was posing for a stock photo that’d have alt text “prostitute near car”.

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  5. Noemi Navarro says:

    You seem to be convinced that trying to reduce the “entry” into the prostitution market (since it is a fixed cost) is a clear deadweight loss. That would be true in case of no externalities. The fact that there is prostitution affects locally and negatively consumer welfare and business profits corresponding to individuals not participation in the prostitution market, therefore the need to reduce it to approach optimal level. The DWL has increased, as compared to the status quo, if prostitution has been reduced to a level that is suboptimal, plus some other conditions on demand and supply.

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