During the ongoing debate concerning tax reform, the German Union (DGB) advocates for the elimination of the reduced value-added tax (VAT) rate. According to the DGB Chairwoman, Yasmin Fahimi, lowering the reduced VAT from seven to zero percent would send a strong positive signal, particularly for low-income earners. She argued that for recipients of smaller incomes, a reduction in VAT on necessities like food and energy would provide significantly more relief than a reduction in income tax.
To finance a lower VAT, the DGB proposes holding “the extremely wealthy and billionaires” accountable. Fahimi suggested imposing a much higher VAT on luxury goods, such as very expensive watches, yachts, jewelry, or luxury cars. This measure, she contends, would only burden those capable of bearing the cost. She emphasized that, overall, the ultra-rich and billionaires must be held much more responsible, rather than placing the burden on employees and consumers. Furthermore, she stated that raising the general VAT from 19 to 21 percent would harm the economy and ultimately represent a redistribution of wealth from the bottom to the top.
Fahimi called on the black-red coalition for a fundamental tax reform. The goal, according to the DGB boss, should be to relieve the tax burden on small and medium-sized incomes while simultaneously increasing the tax take from top earners. Specifically, the DGB seeks to raise the basic tax-free allowance-the income level at which income tax begins-to approximately 15,000 euros and to ensure that the tax rate increases gradually thereafter.
The DGB also advocates for raising the top income tax rate, though this higher rate should only apply after reaching a higher income threshold than it does currently. Fahimi suggested that the top tax rate should rise to 49 percent, but only starting from a taxable income of 87,000 euros annually, equating to roughly an annual gross salary of 100,000 euros. This structure, she explained, would provide relief for “95 percent of incomes”.
