Corporate Taxation in Germany: High-Tax Country or Tax Haven?

Referring to the fee and tax rates which the OECD published last year, the German Federal Ministry of Finance (BMF) claims, that in comparison to the international average, the German tax burden is low. Research on corporate taxation, however, conducted by the Mannheim Centre for European Economic Research (ZEW) does not support the government's positive assessment of German tax conditions.

To the contrary, corporate earnings are more highly taxed in Germany than in most other European nations. This is indicated by the European Commission's current report on corporate taxation, to which ZEW and the University of Mannheim made a considerable contribution.

The fee and tax rates published by the OECD indicate the revenue numbers from financial statistics in proportion to the gross domestic product. Such macroeconomic figures are hugely affected by factors which have little or nothing to do with corporate decisions. Wage tax, for example, has a considerable influence on the income tax rate. A low German corporate tax burden cannot therefore be derived from the figures provided by the OECD. Accordingly, the actual German tax burden, as calculated in the report of the European Commission, is very much at the upper end of the scale (see chart).

It can be therefore concluded that the OECD analysis provides no justification for further delay of tax relief for companies in Germany. In regard of the scheduled Tax Preference Reduction Act (Steuervergünstigungsabbaugesetzes), a further increase in the effective tax burden, and therefore worsening conditions for Germany as a location for industry and investment, is to be expected.

Contact

Dr. Gerd Gutekunst , E-mail: gutekunst@zew.de

Prof.  Dr. Robert Schwager, E-mail: schwager@zew.de

Prof. Dr. Christoph Spengel, phone: +49(0)621/1235-142, E-mail: spengel@zew.de