I am having a difficult time understanding this. Not the mechanism, nor the logic of it.

Once Elias Fardo, beeing an accountant, put it like that: The goal of tax systems is to maximize tax revenue, to claim as much as possible, with the pain just(!) bearable for those who have to pay it.

A personal story nicely showing that: In the 90´s I immigrated to New Zealand. NZ then was taxing my worldwide income. But the Double Tax Agreement between both countries gives Germany where my IT books were sold the right to withhold 10% of the royalties I received from my German publisher.

The "fun" part: In Germany there was a 7% GST/VAT on books. While living in Germany my quarterly bills to my publisher therefore were
- X% (my Royalties) of his revenue from my books he sold
- plus 7% of X%

Those additional 7% GST/VAT were not mine but I had to hand them over to the tax department. In effect as every business I was their unpaid helper in collecting GST/VAT.

This GST/VAT applies only to domestic businesses. So after moving to NZ there was no added GST/VAT in my bills, I just received the X%. But Germany nevertheless withheld 10% of 1.07*X%. It withheld 10% not only of the royalties I received --- but additionally 10% on a "virtual" GST/VAT I actually did not receive!

I didn´t bother as the withheld tax can be claimed against the tax I had to pay in NZ (Double Tax Agreement again, to avoid double taxation). My total tax paid therefore was the same, although Germany withheld tax on money I never received. But NZ this way was "cheated" by Germany who unlawfully grabbed some tax I otherwise would have had to pay in NZ.

A clever dirty trick of Germany to maximize tax revenue, to get a bit more, on the expense of other countries, because as we say in Germany: "Where there is no plaintiff there is no judge". And as individual tax payers don´t bother, don´t have to pay a higher total tax, no individual goes to the length to sue Germany (and apparently too small for NZ etc. to do that, so Germany gets away with it).