The federal and state governments are collaborating on comprehensive tax simplifications aimed at benefiting both citizens and businesses. According to documents from the Federal Ministry of Finance, the goal is to allow millions of employees to forgo individually claiming employment-related expenses, as these costs will be covered by a uniform flat rate when calculating income tax.
Two main models are currently under discussion. The states have proposed introducing a new general daily work allowance that would incorporate existing deductions, such as the commuter or home office allowances. However, Federal Minister for Finance Lars Klingbeil (SPD) has expressed skepticism regarding this idea, noting that it requires “significant systemic change” and would result in billions in lost tax revenue.
The Federal Ministry of Finance favors a different approach: substantially increasing the current employee flat rate from €1,230 to €1,840. Under this plan, 3.7 million taxpayers would no longer need to gather documentation or declare receipts for their costs, since their actual expenses would fall below the new maximum flat rate.
For employees whose actual costs exceed this enhanced flat rate, the deduction would be limited. Only expenses falling into five core categories-travel costs, business trip costs, professional development costs, union membership fees, and the home office allowance-would be permissible. Nevertheless, the states of Bavaria and North Rhine-Westphalia have raised concerns regarding this restriction.
Insiders report that the final decision on the matter remains unclear. While both the federal and state governments emphasize that the discussions have been constructive, the shared objective is to achieve approval for the tax simplifications within the current year. The discussion papers list 37 specific measures, the majority of which have already reached an agreement.
