A surge in municipal business tax rates has reached record levels across Germany, sparking concerns about the nation’s economic competitiveness and placing increased pressure on businesses already grappling with rising costs. According to a recent analysis by the German Chamber of Industry and Commerce (DIHK), the average business tax rate across the country has risen by one percentage point this year, reaching 438 percent. The findings, reported by “Welt am Sonntag” reveal a pattern of escalating municipal levies, with 64 communities raising rates and only four lowering them.
The disparity in rates is significant, with Oberhausen and Mülheim leading the way at 580 percent, while Leverkusen and Monheim exhibit the lowest rates at 250 percent. Municipal authorities are defending the increases, citing unavoidable financial pressures. Uwe Zimmermann, Deputy Secretary-General of the German Association of Cities and Municipalities, attributed the increases to an anticipated 30 billion euro deficit for local governments this year, describing the current adjustments as “very moderate”. Further minor increases are projected in the coming years.
The German Association of Cities insists that these fiscal shortfalls are not the result of local mismanagement. Christian Schuchardt, Chief Executive of the Association, emphasized that escalating social costs and mandated responsibilities assigned by the federal government and individual states, but insufficiently funded, are the primary drivers. He warned that local real estate taxes, alongside business tax, will continue to rise unless municipalities receive “rapid and substantial relief”. The Association is advocating for a larger share of joint taxes to be allocated to local governments and a reduction in statutory obligations imposed upon them.
However, the increased tax burden is drawing sharp criticism. Helena Melnikov, Chief Executive of the DIHK, characterized the German business tax system as a “unique and detrimental path” arguing that the regional burden placed on companies, in addition to corporation and income taxes, is exclusive to Germany. Despite years of reform discussions, progress remains stalled, hindered both by municipal resistance and a lack of support from state governments. Melnikov cautioned that if the situation deteriorates, businesses may consider relocating sites and production facilities beyond Germany’s borders. The system, she argues, risks undermining Germany’s competitiveness on the global stage and demands immediate, comprehensive reform.
