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The corona crisis has caused national debt to explode worldwide.
Not only in Germany is the debate about who should pay for the whole thing.
Federal Finance Minister and SPD candidate for Chancellor Olaf Scholz makes no secret of the fact that he, in addition to new debts, also considers tax increases to be necessary.
The United States and Great Britain are already one step further: In Washington and London there are already concrete plans to increase corporate taxes in order to plug the gigantic financial holes.
This brings movement into international tax competition.
For decades, tax rates were plummeting around the world.
Not only the EU Commission warned of a “race to the bottom”, a race to undercut, which would weaken the public budgets of the nation states and limit the scope for political decision-making.
But now, in the wake of the Corona crisis, the pendulum seems to be swinging in the other direction again.
And just as the USA and Great Britain under Ronald Reagan and Maggie Thatcher ushered in the era of falling tax rates in the 80s and 90s, it is now these two states that stand for the new trend.
Britain was particularly aggressive in competition
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For US President Joe Biden, tax increases are not just a fiscal necessity.
Especially since he is driving his country's debt level into completely new dimensions with his trillion dollar economic stimulus packages.
For the Democrats, however, it is also about a turnaround in tax policy.
While his predecessor Donald Trump drastically reduced the corporate tax rate from 35 to 21 percent, Biden plans to increase it to 28 percent.
In addition, high earners are to be burdened more heavily with income tax, and a higher capital gains tax is also to become part of the targeted largest tax increase in almost 30 years.
Great Britain is also changing course.
For ten years the kingdom had stood for particularly aggressive tax competition and pushed the corporate tax rate further and further down to 19 percent - the lowest level of the large industrialized countries.
Before the Corona crisis, the conservative government even held out the prospect of a further reduction to 15 percent in order to remain attractive to investors after leaving the EU.
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But in view of the extremely tight budget situation and record new borrowing of almost half a trillion euros this year, Boris Johnson's government is now forced to do the opposite and to increase taxes sharply.
The corporate tax rate is set to climb from 19 to 25 percent in 2023.
The British Chancellor of the Exchequer Rishi Sunak explains the new course when the economy has recovered again.
The tax debate is also ongoing in Germany.
And the prospect of a global trend reversal as a result of the Corona crisis gives those who advocate higher burdens a tailwind.
The international comparison of tax rates shows, however, that even after the fiscal turnaround in the USA and Great Britain, Germany is still under pressure to make its corporate taxation more attractive.
With a total tax burden for corporations of almost 30 percent, the Federal Republic of Germany remains "the bottom of the table in Europe in terms of tax policy", as stated in the analysis "The tax burden on companies in Germany" by the Federation of German Industries (BDI) and the Chemical Industry Association (VCI) is called.
Source: WORLD infographic
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In contrast to Germany, most EU countries have reduced their corporate income taxes, in some cases significantly, in recent years.
Belgium lowered the corporate tax rate from 29 percent (2019) to 25 percent (2020), France from 32 to 31 percent.
France is also planning a further reduction to 27.5 percent (2021) and to 25 percent from the 2022 financial year, and President Emmanuel Macron has so far stuck to this line despite the sharp rise in national debt.
Only the Netherlands, which had planned to gradually lower the corporate tax rate from 25 to 21 percent before the outbreak of the pandemic, overturned this plan - but are still well below the German level.
"The change in tax policy in the USA and Great Britain does not change the fact that Germany, as a high-tax country, remains under pressure in international tax competition," says Friedrich Heinemann, head of the corporate taxation and public finance research department at the Leibniz Center for European Economic Research (ZEW).
One could not yet speak of a broad trend towards higher corporate tax rates.
There is still fierce tax competition, especially within the EU, says the economist.
Hungary attracts investors with a rate of only nine percent.
Ireland or the Baltic states also rely on low taxes in order to be an interesting location despite their geographical peripheral location.
Great Britain, with its overall very liberal economic system, also remains attractive for entrepreneurs.
Especially since the government's tax plans not only provide for higher rates, but also very massive relief in certain areas.
In his recent budget speech, Chancellor of the Exchequer Sunak announced the establishment of eight new special economic zones (Freeports), in which not only goods can be handled duty-free, but companies are also offered extremely favorable tax regulations.
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Investment incentives are urgently needed right now
The Johnson government's tax plans also include the introduction of a super special depreciation of 130 percent, with which a strong investment incentive is set.
Anyone who invests in Great Britain over the next few years will receive money from the state for free.
The super special depreciation is a “clever Johnson trick”, says ZEW researcher Heinemann.
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This is because such tax investment subsidies go easy on the budget and specifically relieve the burden on companies that are expanding their activities at home.
"In view of the high national debt, the British are pursuing a policy of smart tax competition with the new freeports and super special write-offs," says the President of the Ifo Institute, Clemens Fuest.
Instead of ever lower tax rates, they are now aggressively relying on very attractive special rules.
"This shows that the international tax competition continues despite the Corona debts," emphasizes the top economist.
"As a high-tax country, Germany can no longer afford to do nothing, let alone a discussion about tax increases."
Particularly now in the crisis, targeted investment incentives for companies are urgently needed, says Fuest.
This included improved loss offsetting and accelerated depreciation.
"But the next federal government should also offer the prospect of a reduction in the overall tax burden on companies towards 25 percent," advises the Ifo boss.
Because the sentence has an important signal effect for investors.
But the tax hike debate in Germany has been going on for a long time in this super election year.
The SPD, the Greens and the Left are advocating higher inheritance taxes and a new wealth tax for partnerships as well.
The increase in income tax for high earners sought by the three parties would also affect a large proportion of medium-sized companies.
Finance Minister Scholz recently announced that he wanted to introduce the long-announced option right during this legislative period.
This enables private companies to be taxed like a corporation in the future.
The Greens and the SPD want to defuse international tax competition.
The Social Democrats are calling for the unanimous principle of unanimity in the EU to be abolished in favor of majority decisions and in their election manifesto promise "an end to tax dumping between the member states, particularly in the area of corporate taxation".
The Greens are becoming even clearer in their program and are announcing "a common assessment base for corporate taxes and a medium-term minimum tax rate of 25 percent without exceptions" for Europe.
Countries such as Ireland, Hungary or the Baltic states would have to look for an alternative to their business model based on low taxes.
And since the average tax burden on capital charges in the EU (excluding Germany) is currently just under 21 percent, many other countries would also have to raise their taxes.
The CDU Economic Council gives such tax policy ideas a clear rejection.
"There are good reasons why Germany has always advocated maintaining the principle of unanimity in tax policy," said the general secretary of the party-affiliated trade association, Wolfgang Steiger.
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This is a core component of the sovereignty of states, which must not be given up.
“Internal competition for the best policy moves Europe forward.
Equalization, on the other hand, weakens it further. "If a majority of the states force their will on a minority, that will increase the centrifugal forces from the Union, warns the head of the CDU Economic Council.
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