Wirtschaftsweise Schnitzer wants to ask company heirs to pay more: Existing regulation "not plausible"

Created: 12/28/2022, 9:54 am

By: Thomas Schmidtutz

Monika Schnitzer: The chairwoman of the Economic Wise Men considers the deduction-free pension at 63 "wrong".

© Michael Kappeler/dpa

The head of the Economic Wise Men, Monika Schnitzer, has spoken out in favor of a reform of the inheritance tax and also wants to make heirs of companies more responsible.

Munich – The chairwoman of the Economic Wise Men, Monika Schnitzer, has called for a far-reaching reform of the inheritance tax.

A "comprehensive new regulation" is "indicated", said Schnitzer in an interview with

from IPPEN.DIGITAL.

Those who do not inherit a house now have to “earn very, very well in conurbations such as Munich, Frankfurt or Hamburg in order to even have the chance of owning a home,” said the economist.

On the other hand, home heirs would have “much better chances of starting out”, even if they had to pay inheritance tax. 

At the same time, Schnitzer spoke out in favor of a fundamental restructuring of pensions.

"We can't afford the pension system much longer," she said.

The federal government already has to support the pension funds with 110 billion euros per year.

"If we continue like this, in 25 years every second euro from the federal budget will go to the pension fund as a subsidy," warned the professor for comparative economic research at the Ludwig Maximilian University in Munich.

spoke to Schnitzer about retirement at 63, the promotion of e-cars, the trade dispute with the USA and the chances of an economic recovery in the coming year.

Prof. Schnitzer, the start of 2022 was associated with great hopes.

Many economists have counted on a relaxation after the corona pandemic and expected an upswing.

In fact, 2022 brought us a war in Ukraine, the energy crisis, inflation rates at historic levels and fears of a recession.

Now 2023 is just around the corner: Can you give us a little hope at the turn of the year that next year will finally be better?

Next year will certainly be difficult again because the gas supply for next winter is not yet fully secured and we will then have to do without Russian gas.

But a crisis always releases energy.

We are currently seeing this at the new LNG terminal in Wilhelmshaven, for example.

The authorities granted the permits in record time.

If we take that as an example, there is certainly reason for optimism for 2023.

After all, the leading German economic research institutes are no longer looking to the coming year quite as gloomily as they did in late summer.

The Munich ifo Institute, for example, only expects a mini minus of 0.1 percent for 2023.

In its annual report at the beginning of November, the SVR had predicted a minus of 0.2 percent for next year.

The IfW in Kiel is even assuming an increase of 0.3 percent.

Will the 2023 recession fail after all?

Despite the environment, households in Germany are still optimistic and are making up for losses in real purchasing power by saving less or even liquidating reserves.

So the consumer spirit has not dampened too much so far.

However, the global economic environment remains challenging.

Like Europe, the USA is currently struggling with high inflation.

China has long backed a rigid zero-Covid policy.

This has led to massive production restrictions.

The Chinese government has now significantly relaxed its corona policy.

However, this could lead to very high sickness rates and also high death rates.

So is China possibly the greatest risk for the German economy in the coming year?

Yes.

Because the Chinese government's new corona course could also put a strain on global supply chains.

There is also a growing risk that Chinese consumption will come under pressure.

That could happen to us too.

After all, some German car manufacturers make 40 percent of their sales in China.

And then there's a geopolitical question mark: If Beijing carries out its threat and acts against Taiwan, we will be forced to respond - with potentially serious economic consequences.

In Germany, many companies and consumers are currently very critical of energy policy.

Renewables currently provide hardly any energy.

The operation of gas power plants is currently extremely expensive.

And the expansion of electricity generation via coal-fired power plants massively increases CO2 emissions.

To this end, the last three remaining nuclear power plants are to be finally taken off the grid in mid-April.

In view of the current environment, is the planned shutdown of nuclear power plants at all justifiable?

In any case, the planned phase-out of nuclear power plants makes little economic sense.

Nuclear power plants help because they increase base capacity, so less gas is needed to balance peak loads.

In the Advisory Council, we have also advocated examining a possible extension of the service life very carefully as long as there are acute shortages in the energy supply.

That could be another two or three years.

But in the end, operating the nuclear power plant is a political decision.

Conversely, however, it is also clear that nuclear power is not a panacea, if only because of the comparatively small amount of electricity that is also available with the extended service life.

In addition, nuclear power does not help those companies that need gas as a raw material for their production.

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Because of the recent cold spell, the gas storage facilities are currently emptying rapidly.

The filling levels are now at 88 percent.

We recently clearly missed the targeted energy saving target of 20 percent compared to previous years.

Are we still threatened with forced shutdowns in the emergency plan gas after the turn of the year?

At the moment I am very confident that we will get through the winter without gas shortages and rationing or even forced shutdowns.

Of course, the recent cold wave has further increased gas consumption.

And that we now want to make ourselves comfortable at home over the holidays is very understandable.

But after that, it's time to save energy again.

In addition to the appeals, the prices will also help.

Many households have not yet received a statement with the new prices.

After the turn of the year it will be different.

This will provide an additional incentive to save.

The rampant energy crisis is also taking its toll on industry.

The energy-intensive metal, chemical, glass and paper sectors in particular view the development with great concern.

In many cases, the production is hardly worthwhile, it is said.

In the chemical industry alone, production recently fell by a good fifth.

According to the industry association VCI, every fourth company is now in the red.

VCI President Markus Steilemann warns that many companies will migrate to the USA or China.

Is Germany threatened with deindustrialization?

In the current annual report, we dealt very intensively with the topic of energy supply for industry.

Essentially, three criteria are important here: Where is there a particularly high energy intensity per euro earned?

Where are there short-term liquidity difficulties because the gross margin is too low to absorb the increased energy costs?

And how big is the competition from non-European countries.

This affects how much you can raise prices.

The chemical industry has already significantly improved its energy efficiency in recent years.

Many companies supply products in markets with manageable competition, sometimes with very reasonable margins.

These companies have scope for price increases, some of which they are already making use of.

Therefore, the excitement is only partially understandable.

If certain basic chemical products are actually no longer manufactured here in the future, such as ammonia, this will not endanger our economy as a whole.

And as far as the note on China is concerned: In the current political situation, I do not think it is very wise for companies to migrate to China or significantly expand their involvement there.

The chemical giant BASF is sticking to the planned construction of a huge Verbund site in China and wants to invest around ten billion euros in it?

If BASF can live with all the political difficulties that this entails or could entail, that is a company decision.

However, the company should not expect the state to help out and take on the risks when there is trouble.

That would not be correct.

At the turn of the year, the Inflation Reduction Act (IRA), worth billions, came into force in the USA to protect the climate.

Because of the funding, many companies have already announced that they will reconsider their investments in Germany or Europe in favor of the USA.

How dangerous is the IRA for Europe?

We're talking about a package with a volume of around 370 billion dollars and a term of ten years.

That's not all that big compared to the size of the US economy.

The EU has already presented packages of a similar magnitude.

However, the car manufacturers view the IRA with great concern because buyers of foreign e-cars in the USA will no longer receive any subsidies if the vehicles are not of US production.

Can Europe just accept that?

Basically, you should stay in touch with the Americans.

If that doesn't lead to a solution, you'll definitely have to look for alternatives.

France is pushing for a tough course including an EU aid package?

It is understandable that Europe tries to resist when other countries restrict free trade.

One can certainly consider what aid is already planned and focus on European companies.

But that reduces competition and therefore innovation.

EU Commission President Ursula von der Leyen has brought a sovereignty fund into play because of the IRA, including taking on joint debt like the Corona reconstruction fund.

Right?

In the most recent annual report, we spoke out in principle in favor of European-financed projects, provided they are in the European interest and create European added value.

With the Sovereignty Fund, Europe could increase its autonomy precisely in those areas where we are dependent on China or the US.

The question is how to finance it: through debt, contributions from the respective member states or income that the EU receives itself.

These alternatives must be examined very carefully.

Because the two crises have made us very willing to spend.

So yes to aid and no to taking on new community debt?

Possible debt financing for future investments can be justified, but should still be carefully considered, especially given that interest rates have recently risen significantly and new debts are no longer as cheap to finance as they were two years ago.

At the turn of the year, the federal government throttled the aid for e-cars.

Market researchers expect that sales of e-vehicles in Germany could therefore halve next year.

Can the traffic light target of 15 million e-cars by 2030 be achieved at all?

Due to government support, the demand for e-cars has increased significantly in recent years.

However, the industry can hardly keep up with the delivery.

As long as things don't get better, further incentives to buy don't make sense.

They drive up prices and the automotive industry is pocketing a lot of money – without more e-vehicles being on the road as a result.

The aid for hybrid cars does not make sense either, because the electric drives in these vehicles are hardly used.

Apart from that, the question must be allowed as to whether the range of cheap e-cars offered by German manufacturers is large enough.

In China, too, the e-car business is no longer doing so well for German manufacturers because they hardly have any vehicles in the lower price segments on offer.

So the automotive industry is in demand here.

If we continue like this, in 25 years every second euro from the federal budget will go to the pension fund as a subsidy. 

Prof. Monika Schnitzer on the long-term financial risks of the federal government.

Concentrated expertise: The head of economics, Monika Schnitzer, hands over the latest edition of the annual report by the German Council of Economic Experts to Federal Chancellor Olaf Scholz (SPD).

(Archive image) © Michael Kappeler/dpa

Monika Schnitzer: We can't afford the pension system much longer

The pension at 63 introduced in 2014 has become a sales hit.

Last year alone, 270,000 employees retired without deductions in this way, provided they had previously paid into the pension fund for 45 years.

But early retirement tears a big hole in the pension fund.

In the meantime, more than three billion euros a month are due for this alone.

How much longer can we afford this?

We cannot afford the entire pension system much longer.

Around 110 billion euros are already flowing into the pension fund from the federal budget every year.

That is a quarter of the entire federal budget.

If we continue like this, in 25 years every second euro from the federal budget will go to the pension fund as a subsidy.

And retirement at 63?

I think the deduction-free pension at 63 is wrong – and not just because of the costs.

We can't afford to retire at 63 because we don't have enough people.

Even for simple jobs, we hardly find any staff in Germany.

Of course, everyone is free to retire - but not without deductions.

Chancellor Olaf Scholz is now also concerned about the development.

You have to increase the proportion of those "who can really work until retirement age".

How exactly could this issue be addressed?

The simplest variant would be: no more pension at 63 without deductions.

But in order to make the pension system more secure, we probably have to make several adjustments.

Let's take retirement age.

The Council of Economic Experts' proposal is very clear: for every year that life expectancy increases, the retirement age should increase by eight months.

So should we link pension to life expectancy?

Yes.

We are currently reaching the targeted retirement age of 67 in 2031. Life expectancy is increasing by one year every ten years.

This would result in a retirement age of 68 for 2046 and 69 for 2061.

The second adjustment screw would be an increase in pension contributions, and that is now.

Then the baby boomers who will retire in a few years but have had too few children to finance these pensions would also make a contribution.

You could also flatten the rise in pensions.

Then retirees would start at the same level as now, but the increases would then lag behind the general increase in wages in the future.

This would typically affect richer people more, because statistically they have a higher life expectancy,

but they have usually taken good precautions anyway.

The fourth possibility would be to redistribute within a pension generation.

In the end you have to turn all the adjusting screws.

But in many professions with hard physical work, longer working lives are hardly reasonable.

What has to happen there?

In physically very demanding jobs, many people are no longer able to work at the age of 50, just think of nurses in hospitals.

Instead, we have to think much more about how to retrain employees and give them perspectives in areas that are still good for them to do.

Take a carpenter, for example: Many built roof structures at the beginning of their professional life.

When they get older, they switch to training or plan new jobs.

We have to push these models.

Shouldn't we also use civil servants or freelancers in the future and have them pay into the pension funds?

This is indeed worth considering.

But one should not expect that the pension system will be reorganized as a result, because whoever pays in also acquires entitlements.

Retirees on the park bench: The chairwoman of the Economic Wise Men, Monika Schnitzer, has spoken out in favor of a far-reaching restructuring of the pension system.

© Sebastian Kahnert/dpa

Economy Monika Schnitzer: Comprehensive reorganization of the inheritance tax is indicated

In Germany, the prices for real estate have risen massively in recent years, but not the allowances.

Inheritance tax will increase on January 1st.

Now there is growing concern that heirs will have to sell their parents' house because they cannot pay the taxes due.

Is an adjustment needed here?

The problem here is not the inheritance tax, but the high real estate prices.

If you don't inherit a house, you have to earn very, very well in metropolitan areas such as Munich, Frankfurt or Hamburg in order to even have a chance of owning your own home.

If you inherit a house, you have a much better chance of starting out, even if you have to pay inheritance tax.

However, business associations warn of the possible consequences of a new regulation.

In the future, many farms could hardly be inherited because the tax amounts due could become so high that the next generation could be forced to sell them.

What should happen here?

When it comes to companies, I don't understand the excitement at all.

Currently, the tax burden on the inheritance of a company is comparatively low.

On the other hand, if you inherit financial investments, an antique collection or art, inheritance tax is due.

This unequal treatment is not really plausible.

But when it comes to the inheritance of a business, the case is somewhat different.

The majority of the assets are tied up in the company and generally cannot simply be withdrawn.

One could work very well here with deferrals, in which the inheritance tax incurred is divided up and paid off over several years.

There are concrete proposals for this.

That would be comparatively easy to implement and fairer than the existing regulation.

I think a comprehensive overhaul of inheritance tax is called for.