More and more German companies are leaving for cost reasons

metal worker

Energy-intensive companies in particular have to struggle with the comparatively high energy costs in Germany.

(Photo: Photothek/Getty Images)

Berlin German companies are increasingly relocating their business abroad. 32 percent of foreign investments now have the purpose of cost savings. This is the result of a survey by the German Chamber of Industry and Commerce (DIHK), which is available to the Handelsblatt.

This means that more German companies are migrating abroad for cost reasons than they have been in 15 years. Ten years ago, this was the motivation for only 20 percent of foreign investments.

The behavior of the companies fuels concerns about further migration from Germany. The USA and China in particular are luring companies with high subsidies. In an international comparison, high energy prices, bureaucratic costs and the tax burden are seen as increasing disadvantages for Germany as a business location.

DIHK general manager Martin Wansleben considers the survey to be a warning signal, as he said in a fire letter to the heads of the regional chambers of industry and commerce (IHK) at the weekend. “This is almost a wake-up call for better site conditions,” writes Wansleben.

He refers in particular to the tax burden. “Politicians have to set the right course for many issues – for example in tax policy,” he writes.

Weak investment growth

In fact, the investment activity of companies in Germany has continued to be subdued as a result of the crisis. The leading Leibniz economic research institutes forecast growth in investment in machinery, equipment, vehicles and weapons of just 1.9 percent this year.

In 2023, the increase should be 3.2 percent. Stronger growth would be possible due to the transformation to climate-neutral technologies.

Christian Lindner

The Federal Minister of Finance is planning relief measures for the economy in Germany.

(Photo: dpa)

There are several reasons for the reluctance. Interest rates for corporate loans, which have risen by more than two percentage points since mid-2022, are dampening momentum. The number of commercial vehicle registrations, an important leading indicator for investments, also fell in February.

When it comes to the framework conditions for investments, politicians have a direct opportunity to intervene, especially with taxes. As a result of the corona crisis, the federal government had opened up the possibility of degressive depreciation.

The annual depreciation amount is significantly higher at the beginning than with the usual straight-line depreciation. The advantage for the entrepreneur: he or she can deduct more from the tax, which ultimately makes the investment cheaper. However, this regulation expired at the end of 2022.

Climate protection investments should be more worthwhile

The super write-offs for investments in digitization and climate protection announced in the traffic light coalition agreement are still a long way off. Wansleben demands a reaction: “We need tax incentives to make investments in this country more attractive again.”

Apparently, Federal Finance Minister Christian Lindner (FDP) has heard the calls of business. Lindner’s officials are currently developing relief measures for the economy. An important component should therefore be an investment premium. The state should provide tax incentives for companies that invest in energy efficiency and climate protection.

>> Read here: Lindner is working on new tax relief for companies

Presumably, this will not be implemented in the form of a write-off, but a tax premium. This would mean that at least part of the agreement in the coalition agreement would be implemented belatedly.

However, the second part, the funding for digital goods, turns out to be difficult to implement: On the one hand, it is difficult to define what is expenditure for digitization and what is not. Above all, however, there are legal hurdles. State funding for climate protection is easier to reconcile with EU state aid law than funding for digitization.

In addition, Lindner wants to expand the loss offset. Companies can offset losses against future profits and thus reduce the tax burden. During the corona pandemic, these rules had already been made more generous.

Lindner and Habeck want to create investment incentives

In addition, the Minister of Finance wants to favor profits from partnerships if they are not distributed to the company owners but remain in the company.

Partnerships – mostly family businesses – pay income tax like any normal employee, while corporations pay corporation tax to the Treasury.

Actually, both types of company should be treated equally for tax purposes. But the pitfalls of German tax law mean that partnerships are usually disadvantaged for tax purposes.

Lindner is supported by Federal Economics Minister Robert Habeck (Greens). He had expressed similar ideas in January in his annual economic report. In his letter, DIHK Managing Director Wansleben calls for speed from those in government: “The situation is serious.”

More: With these three measures, the Federal Ministry of Economics wants to ensure more investment.

source site-18