Economy 4.0 needs Tax Thinking 4.0: Why the future of taxation is profit-oriented

June 7, 2025

Introduction

In the age of advancing automation, artificial intelligence, and growing economic disparities, the question of how a future-proof tax system should be designed is increasingly being raised. The existing model of income and corporate taxation originates from an era of analog industries and linear employment biographies. However, in a digitalized and more flexible economy, these structures are reaching their limits.

This paper discusses the idea of ​​a far-reaching reform of the tax system, in which the corporate tax is completely converted into a uniform profit tax, while the income tax on the part of employed persons and entrepreneurs is significantly reduced – to around 10%. Taxes would therefore only be levied on actual surpluses. This model promises to strengthen purchasing power, ease the burden on the middle class, and create new momentum for business start-ups – with potentially positive feedback effects for the entire economic area.

In addition to economic and social benefits, this work also analyzes potential risks, challenges, and necessary political and structural framework conditions. The goal is to design a model that is not only economically viable, but also socially just and future-oriented.

Structure of the subsections (headings)

1. Background and problems of the current tax system

2. The concept of a uniform profit tax: definition and model

3. Income tax relief and effects on consumer behavior

4. Economic effects: purchasing power, investment, and innovation dynamics

5. Social justice through performance-oriented Taxation

6. Promoting Entrepreneurship and Startups as a Growth Driver

7. Impact on Government Revenue: Compensation through Consumption Taxes

8. Automation and Self-Employment: A New Employment Paradigm

9. Critical Review: Risks, Limits, and Counterarguments

10. Political and Social Implications: From Crisis State to Economic Republic

11. International Comparative Perspective: Successful Models and Reform Approaches

12. Conclusion and Outlook: Steps towards a new tax and economic order

1. Background and Problems of the Current Tax System

The current tax system of Western industrialized nations – especially Germany – has evolved historically and is based on an economic reality that is increasingly losing relevance. It is essentially based on a strong income tax progression and a dual-track taxation of companies via corporate tax (for corporations) and trade tax (municipal). At the same time, individuals pay income tax on their earned income and on profits from self-employment.

A central problem with the existing model lies in its structural inflexibility in the face of technological and social upheaval. Advancing automation and digitalization are ensuring that traditional employment relationships are increasingly being replaced by new forms of employment—such as project-based self-employment, platform economies, or AI-supported business models. However, the tax system remains geared toward long-term employment in wage-earning relationships and penalizes entrepreneurial risk through opaque, complex, and sometimes deterrent tax mechanisms.

A further problem is the high tax burden on labor. While capital gains, assets, and corporate profits are often protected from taxation through tax structuring options, labor income earners remain heavily burdened. This not only leads to growing inequality, but also to a distorted incentive system that inhibits initiative and discourages consumption.

In addition, small and medium-sized enterprises (SMEs), which generate a large portion of the national economy,creation, are increasingly coming under pressure due to the complexity and level of taxation. The combination of income tax, corporate tax, trade tax, and a multitude of exemptions creates a system that is economically inefficient and socially unbalanced.

2. The Concept of a Single Profit Tax: Definition and Model

The proposed tax reform is based on the idea of ​​taxing all corporate profits – regardless of legal form – exclusively with a single, comparatively low profit tax. This would replace both the corporate tax and large parts of the income tax. Only the actual profit remaining after deducting all operating expenses and investments would be taxed. This tax would also apply to entrepreneurs, thus establishing equal treatment between corporations and sole proprietors.

In return, income tax on earned income would be drastically reduced – to approximately 10%, and only on wages actually paid. Social security contributions would initially remain unaffected, but could be converted to a simpler, solidarity-based model in the long term. This would shift a large portion of today's tax volume to achieved value creation, rather than simply to gainful employment.

At the heart of the model is the idea that taxes should no longer be levied on the potential for value creation (labor), but exclusively on realized surpluses. Profits, not income, are the measure of economic performance.

Such a model would not only significantly reduce tax complexity but also increase transparency and predictability for companies. Tax payments would be clearly linked to economic success – a principle that corresponds to the logic of market-based performance incentives.

3. Income tax relief and impact on consumer behavior

Reducing income tax to approximately 10% would have significant positive effects on private purchasing power. In Germany, the average tax and contribution burden for an employee is over 40% (OECD, 2024). A reduction to 10% would – even taking into account constant social security contributions – lead to a significant net increase in disposable income.

This newly gained purchasing power would flow into consumption and directly strengthen the domestic economy. Lower and middle-income groups, whose consumption rate tends to be high, would particularly benefit from the relief. Higher consumer spending would lead to higher VAT revenues, which in turn could partially or fully offset the losses in income and corporate tax revenues resulting from the reform.

Furthermore, consumption would no longer be indirectly "punished," as is the case today when high wage taxes reduce real purchasing power. Such a structural tax change would also provide a massive boost to small and medium-sized businesses, as small businesses, service providers, and local suppliers would benefit from increased consumption. This, in turn, would have a positive impact on regional employment and tax revenues at the municipal level.

4. Economic Effects: Purchasing Power, Investments, and Innovation Dynamics

In addition to strengthening consumer demand, the proposed model would also have significant investment and innovation-promoting effects. Companies that reinvest their profits would be spared from tax burdens, as only realized profits (after investments) are taxed. This creates an incentive for reinvestment in technology, research, expansion, and personnel.

Startups and young companies, in particular, which typically have high start-up costs, would hardly have to pay any taxes in the first few years—significantly improving their chances of survival. At the same time, a larger portion of potential profits remains at their disposal, facilitating equity accumulation and reducing dependence on external venture capital.

Such a tax framework can act as an economic turbocharger: By linking taxation to real success,Entrepreneurial activity is rewarded, not punished. Innovation cycles could shorten as more financial resources flow into internal company development. The workforce released by automation could increasingly shift to new, self-employed activities – supported by a tax system that encourages entrepreneurship and profit orientation.

5. Social justice through performance-based taxation

A central argument for profit tax reform lies in its potential for sociopolitical balance. While the current system is often criticized for widening the gap between rich and poor, the proposed model could contribute to a fairer distribution of burdens.

Labor income – especially in the lower and middle income brackets – would be noticeably reduced. At the same time, large companies that generate high profits would make a fair contribution. Unlike today, multinational corporations would hardly be able to avoid tax liability through legal profit shifting, since a uniform profit tax is levied on nationally generated surpluses.

By strengthening consumption, those groups that have previously suffered from stagnating real wages will particularly benefit. Furthermore, the tax discrimination against paid work compared to capital would be abolished. The shift from a high wage tax burden to a value-added tax burden creates a new social equilibrium point in which success and contribution to society are balanced.

6. Promoting entrepreneurship and startups as growth drivers

The current tax architecture represents a massive barrier to entry for many founders. High taxes, confusing regulations, and the risk of being taxed in the first year, even if no profit has yet been realized, have a demotivating effect. The proposed reform eliminates these barriers and creates a business-friendly climate in which taxes only have to be paid when a profit has been made.

This reduces the risk for new businesses and promotes entrepreneurship that focuses on sustainable value creation rather than tax avoidance. At the same time, the migration of creative minds abroad is reduced, as economic freedom and scope for development at home are once again worthwhile.

In the long term, such a system change can form the basis for a new, more resilient, and dynamic economic model – one that is not based on subsidies or interventionist economics, but on native growth forces: innovation, work, responsibility, and profit.

7. Impact on government revenue: Compensation through consumption taxes

A frequently cited counterargument against a reduction in income and corporate taxes is the concern about lost government revenue and the resulting threat to the functioning of public institutions. However, the transition to primarily profit-based taxation could be fiscally neutral—or even lead to higher tax revenues in the long term— if the tax base is shifted from acquisition to consumption and value creation.

Value added tax (VAT) is already one of the state's central sources of revenue. With increasing purchasing power and growing consumer confidence—as a result of higher net incomes—VAT revenue would rise significantly. A moderately adjusted VAT structure (e.g., differentiated rates depending on product category or higher rates for luxury goods) could also help to ensure a fair tax progression based on consumption. Poorer households tend to consume fewer luxury goods and are relieved of this burden with an intelligent tax staggering system.

Another aspect is the increased efficiency of tax collection. Simplifying the system by eliminating income and corporate tax laws significantly reduces the administrative burden for the state. Tax offices could focus more on control and advisory functions instead of having to conduct bureaucratic detailed audits. The so-called "tax overhead" - that is, the share of administrativeThe maintenance costs of tax collection could be reduced, which in turn frees up resources for other areas.

Furthermore, government revenues would increase in the long term due to increased economic activity: more business start-ups, more jobs, more production – all of this not only increases the base for consumption taxes, but also leads to more indirect revenue such as corporate levies, fees, social contributions, and investments in infrastructure by prosperous regions.

8. Automation and Self-Employment: A New Employment Paradigm

Increasing automation represents one of the greatest challenges for traditional employment models. Studies by international research institutes predict that in the next two decades, up to 40% of today's jobs – particularly in the middle-skilled segment – ​​could be replaced by automation and artificial intelligence. This development is irreversible and requires a radical rethinking of labor market and tax policy.

The tax model presented here can contribute to supporting a structural change in the concept of employment. By no longer "punishing" employment with high taxes, but instead giving tax advantages to self-employment and entrepreneurial activity, it creates incentives for reorientation and further training. People who lose their salaried jobs due to automation could increasingly move into project-based activities or sole proprietorships – without the bureaucratic hurdles and tax burdens that currently deter many entrepreneurs.

Although automation reduces jobs, it simultaneously increases returns on capital and productivity gains. According to the proposed model, these profits should not remain untaxed, but rather be skimmed off through corporate income tax. This creates a new balance: Machines replace labor, but the profits they generate flow partially back into society via the tax system.

Furthermore, high consumption resulting from the net increase in income would create new jobs in the service sector – in care, tourism, gastronomy, crafts, and the creative industries. Not everything can be automated. This will make society more resilient and diverse in its economic structure.

9. Critical Review: Risks, Limitations, and Counterarguments

Despite the many advantages of the system presented, potential risks and weaknesses must also be openly identified and discussed. A key challenge lies in the volatility of the tax base. If the government relies heavily on profit and consumption taxes, it is more exposed to economic cycles. In recessions, both profits and consumption decline – with direct consequences for tax revenue. This could be cushioned by cyclical balancing mechanisms, such as reserve funds, automatic stabilizers, or government bond mechanisms during economically weak phases.

Another risk is the potential misdistribution of consumption taxes: These are generally considered regressive, meaning they place a greater burden on poorer households. To counteract this, VAT would have to be designed in a socially acceptable manner – for example, through basic allowances for consumer cards, reduced rates for basic foodstuffs, or direct transfers to lower income groups.

In addition, companies could be tempted to artificially reduce their profits through accounting practices – especially international corporations. An effective profit tax therefore relies on digital transparency, international tax agreements, and a consistent fight against tax avoidance and profit shifting. The system can only function fairly if all actors within a globalized market follow comparable tax rules.

Finally, such a reform also requires broad social acceptance. Tax policy is deeply political. Changes of this magnitude can only be successful if they are accompanied by transparency, participatory debates, and broad education. Without trust in the system, everyone willEven the best reform proposals fail.

10. Political and social implications: From crisis state to economic republic

A tax system is not just a technical set of rules, but an expression of social priorities. The current tax architecture is a reflection of past crises – it ensures state control, stabilizes institutional power, and, consciously or unconsciously, promotes a concentration of economic resources.

The transition to a profit tax with a reduced income burden would bring about a fundamental political shift: The state would be forced to think economically because its revenues would be tied to the success of companies, consumption, and productive activity. Waste of resources, subsidy policies, bureaucracy, and war economy fantasies would be curbed by economically based policies. The importance of entrepreneurship and personal responsibility would also change: In an "economic republic," productive contributions to the community, rather than political affiliations, would be the central currency of social participation. At the same time, such a transformation could revitalize democratic culture, because citizens would have direct influence on the level of prosperity through their consumption behavior and economic decisions.

Decoupling the state from wage taxes would make it less dependent on labor market policy coercion. Instead of measures to increase the employment rate at any cost, the focus could shift to long-term investments in education, health, family support, and infrastructure—in other words, in the structural prerequisites for a flourishing economy and a community based on solidarity.

11. International Comparative Perspective: Successful Models and Reform Approaches

Although the proposed model appears novel in its radical form, various elements of this reform idea can be observed internationally. Countries such as Estonia introduced a system in the early 2000s in which corporate profits are only taxed upon distribution – with measurable economic success. Singapore and the United Arab Emirates also rely on low corporate taxes combined with growth-oriented framework conditions, which has led to massive investment flows.

Scandinavian countries show that even high VAT rates – sometimes over 25% – can be successful. are compatible with a strong welfare state, as long as consumption taxes are intelligently cushioned by social measures. In Switzerland, on the other hand, there is a cantonally differentiated profit tax system that energizes competition between regions.

The global discussion on a minimum corporate tax (OECD/G20 BEPS Initiative) shows that international harmonization of profit taxation is already underway. A national profit tax model could serve as a pioneer in creating fair rules of the game and sustainable tax bases at the international level.

12. Conclusion and Outlook: Steps Toward a New Tax and Economic Order

The transformation of the current tax and economic system toward a profit-oriented, consumer-friendly, and entrepreneurially adaptable tax order is more than a technical reform. It would be a paradigm shift—economically, socially, culturally, and politically. In an era in which automation, digitalization, and globalization are challenging traditional models, new answers are needed.

The proposed model of profit taxation, combined with a drastic reduction in income tax, is a proposal that can provide these answers. It offers opportunities for greater social justice, more economic dynamism, and more political accountability—but it also requires the courage to change.

The path to this goal requires a gradual introduction, accompanying research, political communication, and international cooperation. Pilot projects in selected regions or economic sectors, combined with continuous evaluation, are conceivable. A broad-based social dialogue on tax justice and the future economy is also essential.

The end result will not only be a newtax model, but the promise of a new form of freedom: the freedom to pay only when you win – and the obligation to assume responsibility for the community with your own success.

13. Native Economic Growth: Decoupling Purchasing Power Reduction and Production Capacity

The term "native economic growth" describes qualitatively sustainable, organic growth that arises from the economy's internal forces—particularly innovation, entrepreneurship, technological development, and growing productivity. In contrast to "artificial" growth through debt or government stimulus programs, native growth is based on real economic processes.

In classical systems, growth is often linked to an increase in government spending, wage subsidies, or expansionary monetary policy—which leads to a reduction in purchasing power in the long term, as more money enters circulation than real value is created. A tax reform toward profit taxation and simultaneous income tax relief would break this artificial coupling.

How does native growth emerge in the reformed model?

• Tax incentives for productivity: Companies only pay taxes when they generate real profits. This directs capital to where value is actually created. Speculative or rent-based income is de-privileged.

• Strengthening purchasing power: Low income taxes mean more money stays with households. This money flows back into consumption, which stimulates companies to produce real goods and services – a self-reinforcing growth cycle.

• Automation-friendly environment: Robots and AI may cost jobs, but they massively increase efficiency. When humans are decoupled from direct wage taxation, automation loses its society-shattering effect and becomes a productive opportunity.

• Inflation stabilization: Because purchasing power increases not through new money supply, but through productive performance and real economic profits, a natural balance between supply and demand arises. Inflation remains structurally subdued as long as consumption increases keep pace with productivity gains.

This decoupling of reduced purchasing power and growth opens up the opportunity for a sustainable, future-proof economic system that is not based on permanent indebtedness or redistribution.

14. Risks in the Transition Phase: Shock Inflation, Capital Shifts, and System Inertia

As attractive as the model may be, the transition from a tax-based, labor-centered system to a profit-based system is associated with significant risks. During this phase, economic shocks can occur that exacerbate political and social tensions.

Key Risks:

• Shock-like increase in purchasing power: If income taxes are reduced too quickly, net incomes will rise sharply. If the supply of goods cannot be increased simultaneously, demand inflation will occur. There is a risk of short-term shock inflation with rising prices for basic necessities.

• Precarization of the public sector: During the transition phase, tax loopholes could arise if profit taxes are not (yet) sufficiently effective and consumption taxes do not (yet) fully compensate. This endangers infrastructure, social services, and public safety – with significant political consequences.

• Capital flight and speculative dynamics: In anticipation of uncertainty, large amounts of wealth could be shifted abroad. Speculative bubbles (e.g., real estate, cryptocurrencies) can also arise if money flows into stable investments rather than productive ones.

• System inertia and political resistance: Major tax reforms require a consensus across society. Bureaucracies, political camps, and lobby groups could block or dilute reforms. An incompletely implemented system would not only fail, but would also undermine confidence in reform processes.

It is therefore crucial to design the transition in phases, with clear monitoring instruments, accompanying research, and flexible correction mechanisms.

15. Reasons for the Failure of Turbo Economy 4.0

The concept of the "Turbo Economy 4.0" is based on high speed of innovation, digitalized production, self-responsibility, profit taxation, and dynamic market development. However, this system is not immune to failure – especially if certain structural conditions are not met.

Reasons for Possible Failure:

• Imbalance between Technology and Skills: If society is not trained at the same rate as technology advances, a massive digital divide will arise. The economic elite is growing, while a large portion of the population remains in precarious, under-digitalized conditions.

• Collapse of social coherence: If economic self-responsibility is propagated without social compensation, there is a risk of isolation, psychological overload, and social coldness. Not everyone is entrepreneurially inclined – a system that fails to take this into account is divisive.

• Failure of state control: In the turbo-economy, the state often acts merely as a moderator. If it lacks the tools to cushion disruptions (e.g., through social investments, education, or stability funds), it loses its creative power.

• Explosion of urban markets, stagnation of rural areas: Turbo-capitalism tends to consolidate economic centers. If the state does not intervene to compensate, peripheral regions decline into insignificance—a breeding ground for political extremism.

• Concentration of data power: Whoever controls the digital infrastructures (e.g., platforms, AI systems, payment flows) dominates economic reality. Without clear rules, the digital economy threatens oligopolization.

The Turbo Economy 4.0 can fail if it confuses speed with depth, innovation with responsibility, and efficiency with fairness. It needs a foundation that goes beyond pure profit.

16. Countermeasures against the failure of turbo-capitalism

To prevent the turbo-capitalism from slipping into inequality, loss of control, and economic bubble economics, political, regulatory, and social countermeasures are needed to stabilize the model and allow its positive potential to unfold.

Key measures:

• Education Offensive 4.0: Massive investments in digital education, lifelong learning, and entrepreneurial skills. The goal is a "startup-ready society" in which self-employment is a real, learnable option.

• Stability mechanisms in tax design: Introduction of a minimum profit tax rate, progressive tax staggering, and automatic adjustments in response to economic fluctuations. Complemented by a flexible consumption tax policy with social correction factors.

• Strengthening the state as a regulator: The state must ensure that no concentration of power arises through digital monitoring, clear competition rules, and international tax cooperation. Platform regulation, transparency laws, and anti-monopoly regimes are essential.

• Regional compensation funds: To ensure that economic progress strengthens more than just urban areas, we need funding instruments for rural regions, innovation in rural areas, access to infrastructure, and regional business incubators.

• Social capital instead of just human capital: Promoting common-good-oriented economic models, cooperatives, solidarity networks, and cultural initiatives – as a counterweight to pure market logic.

• Ethics and responsibility: A new narrative of business ethics that sees profit as a means to an end – namely, to enable participation, innovation, and quality of life. Turbo-capitalism needs turbo-responsibility.

I would now like to elaborate on points 17 to 21 in detail, in depth, and in a scientific style. The focus remains on economic system critique, fiscal strategy concepts, and possible practical extensions or additions.elements in the context of a profit-based tax system.

17. Inflation risks and countermeasures in the profit tax model

The transition to a tax system architecture with reduced income tax, increased consumer spending, and profit-based corporate taxation entails substantial inflation risks, particularly during the transition period. The classic monetarist concern is: "Too much money chases too few goods."

Main causes of possible inflation:

• Sudden net increase in disposable household income, which encounters a constant supply.

• Capital shifts from dead money to active money (savings reserves are used for consumption or investment).

• Speculative pressure on tangible assets such as real estate, raw materials, or precious metals.

• Delayed production responses in companies - While demand can rise quickly, supply takes time.

Possible countermeasures:

• Consumption tax as a variable dampening instrument: Value added tax (VAT) can be flexibly adjusted to specifically curb overheating effects.

• Temporary sectoral price regulation: In basic services (housing, energy, mobility), a transitional arrangement with price limits, social subsidies, or quotas can provide social cushioning.

• Indexing certain prices to real productivity: Long-term avoidance of inflation by linking prices to real production indicators instead of simply demand trends.

• Productivity-oriented wage policy: A "smart" wage increase, based on the real economy, prevents wage-price spirals and maintains international competitiveness.

18. Scrooge McDuck's Gold Store: Metaphor for Liquid Capital Without Economic Circulation

The so-called "Scrooge McDuck Effect" describes the accumulation of capital in passive stores without productive return to economic cycles. Analogous to the comic book character Scrooge McDuck, who hoards his wealth instead of investing it, the problem of dead money is highlighted here.

Economic consequences:

• Liquidity backlog in the real economy: Capital that is not fed into production processes or innovation cycles does not generate growth – but rather reduces overall economic circulation.

• Capital tensions: While some sectors remain underfinanced, large amounts of money accumulate elsewhere – which, for example, are used to finance investments. B. encourage speculative bubbles.

• Decoupling of assets and real value added: Those who hoard speculatively do not actively contribute to economic dynamics, but benefit systemically from price developments and asset returns.

Political-economic solutions:

• "Gold storage tax": Special levy on liquid, uninvested large capital (above a defined threshold) – analogous to property tax on real estate, but for financial assets.

• Negative interest rate regulations for large non-interest-bearing accounts (as partly envisaged in ECB policy).

• Mandatory minimum reinvestment ratios for institutional investors (similar to solvency guidelines for banks).

19. Too Much Money in Circulation: The Danger of Money Supply-Induced Inflation

A central argument of monetarists like Milton Friedman is: "Inflation is always and everywhere a monetary phenomenon." This means: When the money supply grows faster than the real supply of goods, inflation occurs. This can also become a problem in the reformed tax paradigm.

Causes of excess money supply:

• Reduced tax burden combined with monetary expansion (e.g., through government spending or central bank liquidity).

• Multiplier effect through lending at low interest rates.

• Redistribution of wealth that triggers new waves of consumption without parallel productivity increasesufen.

• Lack of investment channels that productively absorb money (e.g., stagnating infrastructure or sluggish digitalization).

Tax policy countermeasures:

• Investment tax allowances to redirect liquid funds into real capital formation.

• Consumption brakes through targeted luxury taxes (see point 21).

• Growth-adaptive monetary control by an independent central bank, synchronized with productive capacity indicators instead of abstract GDP growth.

20. No tax-based compensation measures implemented: Systemic failure due to one-sidedness

A central risk of any comprehensive tax reform is that necessary compensatory measures are omitted. If only income tax is reduced but no new compensatory mechanisms are installed, imbalances and a loss of trust will occur.

Consequences of a lack of compensation:

• Government deficits due to revenue gaps.

• Increased social inequality, if the wealthy benefit and low-income earners are disproportionately burdened by indirect taxes (e.g., VAT).

• Disintegration of public services, if funding is not secured (education, care, infrastructure, internal security).

Solution:

A modern tax system must be conceived in multidimensional terms. Profit taxation alone is not enough – we need complementary mechanisms that have a social, ecological, and structural impact.

21. Examples of additional taxes, alternative compensation mechanisms, and creative tax ideas

Classic, real, or discussed types of taxes:

1. Luxury tax (e.g., on yachts, private jets, gold watches)

2. Cat tax / pet tax (to refinance animal shelters and veterinary costs)

3. Rodent tax / pest risk tax (for commercial warehouses, feed industry)

4. Gold storage tax (capital hoarding levy - see point 18)

5. Growth tax: Dynamic taxation on companies with Extreme sales growth rates to dampen speculative bubbles

6. Compulsory insurance for automated companies: Mandatory insurance against job losses due to robotics

7. Robot use tax: Replaces wage taxes with machine-related taxes

8. Data tax: For corporations that commercially exploit mass data

9. CO₂ sales tax: Variable depending on the environmental impact of the product

10. Advertising attention tax: Intrusive advertising with sound, pop-ups, or tracking will taxed

11. Soil sealing levy: For ecological compensation in new construction projects

12. Artificial intelligence levy: For the commercial use of generative models above a certain threshold

13. Non-use tax: Capital that is neither consumed nor invested is subject to a minimal "inactivity fee"

14. Missupply tax: In the case of structural overproduction in subsidized sectors (e.g. Agricultural surpluses)

15. Digital dividend levy: Platform companies pay a fixed levy per user interaction.

These measures can specifically help correct distributional, market, and environmental imbalances – without compromising the basic mechanism of profit taxation.

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Author: Thomas Jan Poschadel