Monheim At first glance, the light brick detached house at Sandstrasse 104 does not look like a commercial center. Neither does the surrounding area, the Baumberger Sportfreunde are based in the surrounding houses, and a little further on the Monheim am Rhein stamp friends. Only the dark gray mailbox of number 104 indicates an extraordinary business life. According to the signs on the house, there is a meat shop, some real estate companies, a tire shop and many more: 129 companies in total.
Trade tax is the most important source of income for municipalities. The assessment rate regulates the amount of tax that companies pay on their profits. The German average rate is 435 percent. In Monheim it is 250 percent.
This attracts companies from all over the country – and causes trouble with the neighboring municipalities. Now the North Rhine-Westphalian state government wants to take steps to drain the tax havens. She decided that in the new coalition agreement.
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“We want municipalities like Monheim to pay a certain amount of compensation for poorer municipalities through negative key allocations,” says Simon Rock, financial policy spokesman for the Greens in the North Rhine-Westphalia state parliament. He calls the practice of poaching companies from other municipalities with low trade tax rates “lack of solidarity”. Because the municipalities would have “rehabilitated to health at the expense of others”.
Numerous companies founded subsidiaries
It is an accusation that Daniel Zimmermann would sharply reject. The number of companies in his town has increased drastically since he became mayor of Monheim in 2009 at the age of 27. UPS, DHL, Deutsche Post, Bayer, BASF, Henkel, OQ Chemicals – they all founded subsidiaries based in Monheim or relocated their headquarters to the city.
Monheim am Rhein is one of 90 trade tax havens in Germany. They all have an assessment rate of less than 300 percent and thus attract dubious business models.
(Photo: dpa)
Nevertheless, Zimmermann does not see the solution to the problems in other parts of his state in himself. “Instead of ensuring that the tax rates in Monheim am Rhein rise, the state government should ensure that they fall in Oberhausen, for example,” says the mayor. The assessment rate of 580 percent charged there is not competitive.
Zimmermann’s record shines in Monheim. Today there are 1,900 companies in the town of 46,000 inhabitants – almost 500 more than before the young politician took office. The number of jobs subject to social security contributions rose by 48 percent.
That brings money into the coffers. Monheim now takes in 6341 euros per inhabitant and year in trade taxes. For comparison: In Verl, which is two hours away, it is just over 2000 euros. Verl has the second highest trade tax income per capita in North Rhine-Westphalia.
Big problems in surrounding towns
During his tenure, Zimmermann reduced municipal debt by 120 million euros. Today there is fiber optics for every household, recreation areas, a water park and free public transport. There is construction everywhere in the city.
leader
6341
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Monheim now takes in trade taxes every year – more than any other municipality in North Rhine-Westphalia.
Lance Gregorchuk has seen the city change. “Monheim was a disaster,” he says. Crime was high, says the Canadian, who brought Fitness First to the German market and has lived in Monheim for 20 years. Today he is proud of his small town. She is clean and safe. You can’t say that about every city in NRW.
In fact, there are problems with Monheim’s neighbors. In the neighboring cities on the Rhine and Ruhr, schools and streets are deteriorating, outdoor pools and youth clubs have to be closed. Anger is therefore growing in many places – at precisely such arrangements as at Sandstrasse 104.
“Virtual office + company headquarters from €79.50* net/month. in Monheim am Rhein,” it says on the eBay classifieds portal. Anyone who rents office space in the “1A Bürogemeinschafts & Dienstleistungs GmbH” can have mail forwarded, receives a letterbox label and a telephone number. Call forwarding costs an extra 25 euros per month.
>> Read here: Municipalities book 35 percent more from business taxes than in 2020
The makers behind the shared office are Michael Tiskens and Michael Hermanns. Tiskens is actually an insurance broker. Tiskens offers company offices as a sideline, and his tax advisor gave him the idea. The 1A office community at Sandstraße 104 is on the first floor in a former granny flat.
The secretary’s desk is in the open kitchen. Mail tray, copier and telephone system are placed right next to the fridge, oven and dishwasher. There is a bathtub in the bathroom. Partition walls were installed in the remaining rooms. One searches in vain for shelves or documents.
The few desks and chairs in the otherwise bare rooms officially represent twelve workplaces that can be used by 129 companies. On top of that. As a further offer of the office community, Tiskens and Hermanns rent the same tables and chairs in the evenings and on weekends to students and pupils who are setting up companies.
>> Read here: These are Germany’s trade tax havens
Tiskens and Hermanns see nothing wrong with that. Your customers are encouraged to enter their presence in an occupancy plan. But most would prefer the home office. And indeed: when the Handelsblatt inspects the premises, there is only one tenant in the office. Michael Hermanns says: “We offer our tenants all rental options that the legal framework allows. However, we do not go beyond that.”
Potential Tax Evasion
Shared offices in particular make it difficult for the tax authorities to recognize whether they are dealing with letterbox companies or legal tax avoidance. How are tax authorities supposed to deal with such arrangements in the digital world of work? Tax law professor Johanna Hey from the University of Cologne explains that trade tax havens are not illegal. Although it is not sufficient to change the company headquarters only formally. On the other hand, it doesn’t take much effort to attribute sales to a fresh address. Her conclusion: There is a lot of leeway.
Politicians like Simon Rock want to narrow this space. According to the coalition agreement, the state government of North Rhine-Westphalia wants to support the municipalities and tax offices in auditing business premises. Rock: “One possibility would be for the tax offices to help the municipalities in which the actual business premises of the company are located.”
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That would be new for the companies at Sandstrasse 104. The landlords say that the 1A office community was inspected in 2016 during the course of the opening. Hermanns reports: “The official who was responsible for Monheim at the Hilden tax office at the time lived four houses away.” The official then stopped by once during the conversion work.
Research shows that trade tax havens can lead to letterbox companies settling there whose actual headquarters are elsewhere.
(Photo: dpa)
Since then, the tax office has stayed away. Although there were audits at individual companies in the shared office, says Hermanns. But these would have taken place in the tax office. Hermanns: “I think that says it all.”
Tax dumping worsens the situation of other municipalities
Critics of the tax havens, on the other hand, still have many words. Dormagen’s Mayor Erik Lierenfeld accused his neighboring city of Leverkusen of “trade tax dumping” when it halved its assessment rate to 250 percent in 2019. Dormagen and Oberhausen joined the action alliance “For the dignity of our city”. Across Germany, 65 structurally weak municipalities from seven federal states are taking part. 36 of them come from NRW.
“Municipalities have persuaded companies to relocate through tax dumping. As a result, the situation in municipalities with already below-average tax revenues has deteriorated further.” This is also shown by the example of Monheim.
Before the trade tax was reduced, the city still had a standardized tax capacity of 38.7 million euros. Due to the immigration of numerous companies from neighboring municipalities, this will be around 385 million euros in 2022. Therefore, “For the dignity of our city” welcomes the announcement by the state government of North Rhine-Westphalia to put a stop to the “non-solidarity behavior”. However, the measures planned by the state government will probably not come into force until 2024. Lierenfeld and Rock will have to be patient until then.
More: Municipalities register 35 percent more trade tax than in 2020