VCI Position in a nutshell
The chemical-pharmaceutical industry invests every year over 18 billion euros in Germany. In order to keep it this way, the federal government needs to find answers to international tax policy developments: Since the last major reform back in 2008, little has been done to improve the fiscal conditions.
Quite the contrary, political decisions resulted in further burdens. For example, the assessment base was broadened considerably and there was a stealth increase of the trade tax. Against the backdrop of the corona crisis, there are currently calls for a wealth tax to finance the immense costs.
Germany is falling behind
Instead, a tax reform to the benefit of companies should be launched right now. This is because only an internationally competitive economy can provide strong tax revenues in the long run. The opposite is the case at the moment: Germany is falling more and more behind in the international competition of business locations. In Europe, the tax rates for companies are below 21 percent on average – as compared with well over 30 percent in Germany. Due to the stealth increase of the trade tax in many cities and communities, the tax burden for companies there has even risen to up to 35 percent. In terms of tax policy, this puts Germany at the proverbial bottom of the league worldwide.
Strong commitment to the location
Many internationally operating companies in Germany pay a disproportionately high share of their earnings taxes in this country: According to a VCI survey, some businesses realise only around 20 percent of their global sales in Germany, while this is where up to 60 percent of their worldwide earnings taxes become due. Add to this energy or real estate taxes. There are also positive revenue effects such as the wages and salaries tax (Lohnsteuer) and the employer’s contributions to social insurance because of the above-proportionately high number of staff in this country.
Reduce tax burdens
In view of the already high tax burden, a further tightening through vague and imprecise plans – such as the extension of the real estate transfer tax to "share deals" of capital companies – must be urgently prevented first of all. The same applies to tightening of the foreign transactions tax legislation (Außensteuerrecht) or double taxation in cross-border activities of companies in Germany. In as further step, the burden should be brought down to an internationally comparable level, i.e. it should be reduced at least to 25 percent.
THE VCI IS CALLING FOR THE FOLLOWING
- Reduce company tax
For Germany to keep pace internationally, the reform backlog must be tackled. Company tax should be brought down to an internationally competitive level. i.e. at least to 25 percent. Moreover, a fiscal environment is needed which drives forward innovation and investment in this country - instead of making them unnecessarily difficult.
- Bring company tax in a competitive form and cut bureaucracy
Germany needs to modernise its company tax legislation. Structural reform must lead to a situation where the taxation of foreign activities of enterprises is no longer higher in Germany than the taxation of comparable domestic activities. Therefore, it should be possible at long last to offset foreign taxes in German trade tax, and the much too high “low tax country” threshold under the foreign transactions tax law (Außensteuergesetz) should be lowered from 25 to 15 percent.
- Avoid new burdens
There must be no new burdens from the ongoing OECD projects to reorganise international tax legislations and a global minimum taxation. At German nation level, too, there should be no tightening of the tax legislation, especially not under the guise of preventing abuse. For example, the vague and imprecise new rules of the land and real estate transfer tax should not unnecessarily burden listed capital companies just to prevent “share deals”.
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