Clemens Fuest, President of the Munich Ifo Institute, has expressed skepticism regarding the proposed changes to the so-called wealth tax. According to a reform package presented on Thursday, this tax is set to be 45 percent for assets over €250,000, rising to 47 percent for amounts exceeding €280,000. Speaking to Der Spiegel, Fuest stated that he finds the rationale for this jump of only €30,000 difficult to understand, suggesting that it is politically motivated rather than economically sound. He warns that this increase, coupled with rising pension contributions, places a substantial burden primarily on small and medium-sized businesses, noting that combined with the Soli tax, the burden approaches 50 percent, which could signal that less investment will occur within Germany.
While the government plans income tax relief totaling ten billion euros, Fuest pointed out that achieving a larger volume of relief would necessitate cuts in state expenditure. However, the lack of a corresponding plan for these cuts is, according to him, the package’s greatest weakness.
Marie-Christine Ostermann, President of the Association of Family Business Owners, echoed the criticisms. She noted that income tax essentially functions as the corporate tax for most family-run companies in the country. On Thursday at the TV channel Welt, she stated that this undoubtedly imposes an additional strain. Furthermore, she added that the existing pension reform already involves a two-percent long-term burden through capital cover. An additional burden from tax reforms is now being layered on top of that, despite the urgent need for companies to relieve pressure so they can resume investing.
Ostermann emphasized that higher tax rates and labor costs inhibit investment, but growth requires equity capital. She insisted that the focus must be on driving growth and investments within Germany by allowing companies to retain more private capital, rather than continuing concepts that involve state-controlled subsidies for “future technologies.” Instead, she argues, the priority must be placing trust in the private, free initiative of the country’s businesses. To address this, Ostermann demanded that the government do much more to provide tax relief to companies. If the proposed income tax changes fail, she argued, then at least the electricity tax should be completely eliminated for all companies immediately, stressing that financial and tax relief is the most crucial intervention needed.
