According to the Federal Ministry of Finance, the tax burden on corporations is far too high. It is therefore necessary to „reduce the tax burden for companies to an internationally competitive level in the medium term“, the authors write in an international tax comparison published by the Ministry. This combines data from of the Organisation for Economic Co-operation and Development (OECD) with that of the Federal Central Tax Office, putting them on a comparable basis and ranking them.

Even the nominal corporate tax rates have a signalling function, for example, when companies make investment decisions, which has an overall impact on the attractiveness of a business location. However, pure corporate tax rates only provide a limited picture of whether an investment location actually pays off. The real tax burden at both company and shareholder level must be taken into account. And Germany is in a bad position here: it is one of the highest tax countries in the world, as the comparison shows. This makes investments less attractive, especially as there is also excessive bureaucracy in this country.

Germany only charges a nominal corporation tax rate of 15.8% (including solidarity surcharge). However, local authority taxes must be added to this, which in this case are around 14%. According to the Ministry of Finance, this results in a total corporate tax burden of 29.93%. This puts Germany at the upper end of the tax range in the EU, the USA, Canada and the UK. Only in Japan is it higher.

However, the Ministry of Finance emphasises that taxation at shareholder level must also be taken into account for an overall tax assessment of corporations. The maximum tax level for distributions to shareholders is then just under 50%. This „peak value“ that is only surpassed by a few locations, such as the Canadian province of Ontario with 55.4%.

When it comes to attracting investment, the needs of the German tax authorities need to take a back seat, something which the Ministry of Finance is aware of. The authors refer to measures within the framework of the „growth initiative“ recently introduced in Parliament. Investment incentives have been strengthened, depreciation accelerated, and research allowances increased. There is also „further relief in income tax and supply-side measures in the tax and transfer system“.

However, the enormous tax burden is not only causing problems for investors and entrepreneurs, but also for employees – due to the high burden of social security contributions. These not only make companies reluctant to create jobs, as they are partly responsible for financing the social security contributions, but also lead to complaints from employees about the „tax wedge“. The more they work, or the more they move into higher income categories, the greater the difference between gross and net income. In the group of countries analysed, the burden in Germany for families with two children and slightly above average earnings is high at 40.7% – this is only surpassed by Belgium (45.1%).