According to Marcel Fratzscher, chairman of the German Institute for Economic Research (DIW), the black‑red coalition is expected to close budget gaps by raising the value‑added tax by two percentage points to 21 %..
Fratzscher told the “Redaktionsnetzwerk Deutschland” that both parties have set their red lines. “The CDU/CSU reject tax hikes, while the SPD refuses to cut the social state, and both reject subsidy cuts” he said. “Consequently the coalition will almost certainly raise the VAT. A two‑point hike would bring in about €30 billion”.
He warned that a VAT rise would be “socially catastrophic” because it would burden low‑income households disproportionately. “Yet compared with the alternatives it is a relatively comfortable political workaround” he added. To plug the projected budget hole of over €130 billion between 2027 and 2029, higher taxes and subsidy reductions are necessary, he explained.
Among the suggested measures is a substantial increase in property tax. “Compared with other industrialised nations, Germany taxes wealth very lightly” Fratzscher noted. While a wealth tax for the ultra‑rich would be desirable in principle, the international coordination required makes it impractical at present. In contrast, property tax already taps into wealth and “offers large revenue potential, because land and buildings cannot simply disappear”.
The DIW chief also called for the abolition or at least the trimming of climate‑harmful tax subsidies, which he estimates total €60 billion. He singled out the diesel privilege, the fuel‑tax exemption on kerosene, and the commuter allowance. “They distort competition and create perverse incentives” he observed, adding that the commuter allowance is absurd, “because it pays people to live as far as possible from work”.
Fratzscher urged the elimination of the marriage‑split, which costs the state about €22 billion, and its replacement with a real split system.
