According to an IW study, companies in Germany have paid more taxes than anywhere else in recent years.
(Photo: IMAGO/Kirchner Media)
Berlin Corporate tax revenue in Germany has risen by 45 percent within ten years, which is far more than in other industrialized countries. This emerges from a study by the German Economic Institute (IW) on behalf of the employer-financed Initiative New Social Market Economy (INSM), which is available to the Handelsblatt.
“Germany is a country with the highest taxation and is falling further and further behind in location competition,” says INSM Managing Director Thorsten Alsleben. According to the IW study, corporate tax payments in France, Italy, Spain, Great Britain and the USA “consistently increased by less than 20 percent” between 2010 and 2020.
“Other countries are doing their homework, lowering corporate taxes and making themselves attractive to investors, while Germany is demanding more and more taxes from its companies,” says Alsleben.
In fact, Great Britain, the USA and France have recently lowered corporate taxes. The nominal tax rates for corporations in Germany were 29.8 percent last year. Among the OECD countries, corporate tax rates were higher only in Portugal.
The effective tax burden was 26.6 percent, which also put Germany in the top group.
FDP plans tax relief
Corporate taxes were last reformed in 2008. Since then every attempt has failed. However, the tax burden has risen slightly over the years because local authorities have increased trade tax. Recently there has therefore been movement on the subject again. The Federal Ministry of Finance is currently working on a draft for what is known internally as a “Competition Strengthening Act”, which provides for smaller relief for companies.
The House of Finance Minister Christian Lindner (FDP) is planning an investment premium for companies that invest in energy efficiency and climate protection, greater privileges for retained profits from partnerships and more comprehensive research funding and loss offsetting. “We have to make Germany competitive again in the area of corporate taxes,” said Katja Hessel (FDP), State Secretary in the Ministry of Finance, the Handelsblatt.
This included improved depreciation on investments, but also simplifications via digital processes. “It is now necessary to improve the tax options for liquidity within companies so that Germany becomes an attractive location for investments in the future again,” said Hessel.
SPD and Greens want to remove privileges
However, it is unclear whether the FDP can assert itself with these demands. Because the coalition has fallen out over the budget. SPD and Greens accuse Lindner of wanting to reduce taxes at the expense of social spending.
They also see no need for lower loads. Taxes are just one of many location factors, and property taxes are also comparatively low. The parties are therefore pushing for the introduction of a wealth tax and the abolition of inheritance tax privileges for company heirs.
The CDU has now also adopted this requirement in a new tax paper – as expected, to the annoyance of the family businesses. Reinhold von Eben-Worlée, President of the Association of Family Entrepreneurs, said: “If the CDU’s proposal were to become reality, the succession in family businesses would be on the brink in many cases.”
More: CDU wants higher taxes for top earners