As of: February 7, 2024, 8:00 p.m
By: Lars-Eric Nievelstein
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For years, Germany has been considered particularly unattractive when it comes to relocating companies.
The problem: taxes are too high.
A new analysis makes this clear in an international comparison.
Berlin – Hardly any other country demands as much from its employees in terms of salary as Germany.
German employees notice this with every paycheck, and on the international playing field it scares off investors and potential new employers.
The traffic light coalition has recognized the problem, but there is still no solution.
Nominal tax rate in Germany |
29.94 percent |
|---|---|
Nominal tax rate on average in the EU |
21.13 percent |
Federal tax revenue 2022 (Destatis) |
337.2 billion euros |
Germany holds a record for nominal tax rates
The harsh reality: At 29.94 percent, the nominal tax rate for companies is higher than in only a few other industrialized countries.
Its direct competitor Japan charges 29.74 percent taxes.
An analysis of the tax rules in Europe and other developed economies, carried out by the German Economic Institute in Cologne, showed exactly what the international comparison looks like.
Conclusion: “Germany does not try at any point to ensure attractiveness with tax aspects,” quotes
Wirtschaftswoche
Tobias Hentze, head of the State, Taxes and Social Security Cluster at the Institute of German Economy (IW) in Cologne.
Across all OECD countries, the average tax rate is 23.60 percent, and in the EU it is 21.13 percent.
Tax loser Germany – This is what the international comparison looks like © IMAGO / Bihlmayerfotografie
According to the IW, there are several reasons for this result.
In addition to the inaction of politics so far, this is also due to the difference in tax rates within the Federal Republic.
While wealthier municipalities can reduce the so-called tax rates (individual rates with which municipalities increase or decrease taxes to varying degrees) and thus attract new companies, poorer municipalities are dependent on higher tax rates.
In doing so, they weaken their location and, in the long term, achieve the opposite of the original goal.
Competition between tax systems – Germany is falling behind in international comparison
Tanja Gönner, Managing Director of the Federation of German Industries (BDI), which was also involved in the study, summed it up as follows: “The international comparison makes it clear: Germany cannot keep up with the competition between tax systems.
This still applies to the inglorious top position when it comes to the level of tax burden.” Germany also lags behind when it comes to other location factors, such as depreciation conditions, tax support for research and development and the duration of tax audits.
Modernization and digitalization of corporate taxes is overdue.
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A similar problem exists at the employee level.
When it comes to income tax and social security contributions, Germany is also well above the average of the OECD countries.
An example: For a single person without children, the share of taxes is 47.8 percent of the salary.
“Our tax law must be made fit for the future”
These problems are known to the traffic light coalition.
Finance Minister Christian Lindner (FDP) recently proposed tax cuts to strengthen Germany as a business location.
Specifically, he mentioned an end to the solidarity surcharge as a necessary means.
The Growth Opportunities Act currently being discussed in negotiations also starts there and is intended to provide impulses for private investments - for research as well.
“Our tax law must be made fit for the future,” said Parliamentary State Secretary in the Federal Ministry of Finance, Katja Hessel.
The Growth Opportunities Act, for example, contains tax relief for companies until 2028 and an acceleration of approval processes.
Lindner expects that companies will receive relief of around seven billion euros.
A special bonus for investments in climate protection is also being discussed.
Here, companies should be reimbursed for 15 percent of their expenses for energy efficiency measures.
Finally, the law provides tax incentives for housing construction.
Greens put things into perspective - tax rates are not everything for competitiveness
One problem: The federal government already has to navigate around major holes in the federal budget.
Money is tight, and there are often disputes within the traffic light coalition about the actual price.
Both the Greens and the SPD are wondering where the money will come from - especially since Lindner consistently rejects new debt.
At least there is some optimism from the Greens.
Sebastian Schäfer (Greens) said in response to a major question from the CDU/CSU parliamentary group that competitiveness requires not only tax rates, but also the availability of capital, good education and infrastructure.
In addition, the coalition has already implemented 95 billion euros in relief measures.
“When the economy is growing and prices are rising, nominally rising taxes are normal,” explained the politician.
The Inflation Compensation Act ensures sufficient relief for citizens.