The 2013/04/18 at 08:34
Marie Luginsland, en Allemagne
The electoral campaign is in full swing, with the opposition and the government’s majority parties battling it out on three fronts: increased tax rates for the highest income earners, an upwards hitch of inheritance fees, and a hike in taxes on assets.
If they happen to win the legislative elections in September this year, the Social Democrat Party (SPD) and the Greens (Bündnis 90 / Die Grünen ), currently in the opposition, intend to increase the current tax rate from 42 to 49 % for yearly incomes upwards of 64,000 euros for single taxpayers, and for those upwards of 124,000 euros four couples.
According to the forecasts of the Ministry for the Economy, this measure would yield an extra three billion euros to the State, with another sixteen billion reaped by raising inheritance fees and 7.5 billion via other measures including a modification of taxation on company vehicles.
1.4 million jobs under threat
All these proposals have incited the lifting of a shield of protest by the heads of sole proprietorship structures – the case of 90 % of German enterprises – and particularly those making up the famous Mittelstand, those efficient SME family structures that are often active exporters, as noted by Eric Schweitzer, recently elected President of the DIHK, the federation of German CCIs. “Every point of increase in income tax rates means the disappearance of 200,000 jobs,” he warns, reminding that these company heads constitute the backbone of the German economy. “These enterprises are the strength of our country and account for 60 % of jobs. It should be noted that they reinvest 80 % of their profits. Any tax increases, whether on income, assets or inheritance fees, means fewer profits, and so less investment, and as a result, fewer jobs,” he continues.
The DIHK estimates that 200,000 jobs would be lost by one point of increase in income tax. The implementation of the project of the Social Democrats and the Greens would lead to the elimination of 1.4 million jobs. Beyond the impact on the employment market, Eric Schweitzer fears a slowdown of investments made by company heads in sectors peripheral to their activity, such as real estate or renewable energies. “Diversifications that generate growth in other sectors and guaranteeing jobs,” he notes.
Eric Schweitzer, himself the head of a family business (Alba), issues a reminder that “no SME remunerates a company head more than necessary”. The debate raised by the Social Democrats who wish to abolish the deductability of company head income meets no more approval from the President of the DIHK. “This would lead to de facto imposition of 65 %. This situation à la française would urge the top company heads to leave the country!” The position has been confirmed by the federation of SMEs, the BVMW. At this point in time, 10 % of German taxpayers pay 55 % of the global volume of income tax in a country where the average annual income per individual is 28,300 euros.
Curiously, France has invited itself to the debate for a second time. This time indirectly, via the programme of the Green Party (Bündnis 90 / Die Grünen). The latter draws inspiration from the French system in its project to set up tax breaks for research: enterprises with fewer than 250 employees are to obtain a 15 % tax break on their research spending. This would be accompanied by other measures to lighten the burden for SMEs – whom the Greens intend to protect –, for example abatements for entrepreneurs who reinvest profits in their enterprises.