Property tax in Germany: A completely wrong signal

Additional taxes, which now of all times are being discussed by various political parties, when entrepreneurial families are trying to save their companies, lead to high additional burdens on companies, which now need every cent to overcome the crisis. Such taxes would inevitably be at the expense of necessary investments and detrimental to competitiveness, growth, and jobs.

The VDA categorically rejects the introduction of a wealth tax or a (one-off) capital levy on business assets. This would broadcast the completely wrong signal, especially on the road to recovery, and would be misguided tax policy.

A new taxation of business assets in addition to profit-linked taxation would threaten companies with an overwhelming tax burden or even an extremely harmful taxation of their very substance. If wealth tax is levied even when companies are not making profits or – as is often the case in the current situation within the automotive industry – are even making losses, the tax will have to be paid out of the given company's assets. This would place an unjustified burden on the companies' liquidity, which is likely to remain in focus for years as a result of the current conditions, and would unnecessarily jeopardize the continued existence of many companies. Urgently needed funds for necessary investments in the future viability of the companies would be lacking. This would particularly affect many family- and owner-managed SMEs in the automotive supplier industry, which form the backbone of the German economy and should be the driving force out of the crisis.

Moreover, the introduction of such a tax would involve considerable administrative efforts on the part of all those parties involved and subject to dispute. Any potential tax revenues would be disproportionate to the effort involved.

An international comparison reveals that a wealth tax is no recipe for success: The majority of EU and OECD countries have either never levied a wealth tax or have abolished it.

The following example calculation illustrates the excess taxation resulting from the interaction of wealth tax and income taxation.

(Taking a private company as an example: Tax rate 1%, personal tax-free allowance 2 million euros, valuation according to fair value.)

There are also tight constitutional limitations to a one-off property levy, and the necessary conditions for this are not met. While the coronavirus pandemic undoubtedly places a heavy burden on the state's finances, the current belief is that it still does not constitute a situation of exceptional financial need on the part of the state that would justify a property levy. The current situation is not comparable with the burden in the postwar period.