ZEW Study on the Impact of Capital-Based Taxes
Research
On behalf of the Foundation for Family Businesses (Stiftung Familienunternehmen) ZEW researchers conducted a study titled “The Impact of Capital-Based Taxes for Family Businesses, State and Society”. The results of the study indicate that a net wealth tax or a wealth levy would involve numerous problems and would deteriorate investment conditions for businesses in Germany.
According to calculations based on the European Tax Analyzer, the tax burden of large corporations would increase by 10.8 % if the reform plans of the Social Democratic Party (SPD) were implemented, and by 46.5 % if the reforms proposed by The Left (Die Linke) were realised. To measure the SPD reform proposal, the study draws on the draft legislation put forward by the “red-green” (SPD/Green Party coalitions) federal state governments to introduce a wealth tax law in 2014. Moreover, shareholders would also face increased income and wealth taxation. The tax increase is considerably higher if the shareholder level is also taken into account: 20 per cent according to the SPD proposal, 36 per cent according to a proposal by the Green Party, and 126.5 per cent if reform proposals by The Left were put into practice. Partnerships would face tax increases on a comparable scale (Social Democratic Party: 24 %, Green Party: 40 %, The Left: 101 %)
The study also suggests that a net wealth tax creates incentives to shift private and company assets abroad. The establishment of holding companies abroad and external financing of German businesses may result in a further reduction of taxable assets in Germany. Consequently, the assessment basis for income and profit taxes in Germany could be undermined.
The intention behind the revival of the wealth tax is to improve distributive justice. However, the study found no indication that a wealth tax brings about a more even distribution of wealth. Countries such as Norway, Switzerland and France do have wealth taxes, but the distribution of wealth is more unbalanced than in Germany, according to the Gini coefficient.