The intended tax reform by the government falls short of the mark. The government in Berlin intends the reform to strengthen the competitiveness of German businesses as well as the attractiveness of Germany as a business location for national and international investors. According to calculations carried out by the Centre for European Economic Research (ZEW) and the University of Mannheim, however, the tax relief, although it improves companies’ competitiveness, is too small. Capital-intensive and profit-distributing businesses in particular, hardly benefit from the tax relief. Furthermore, the planned reform causes new distortions and demarcation problems, making the German tax system even more complicated than it already is. Furthermore, the dependence on the legal form of the company taxation is criticised. It was intended to cushion the dependence but instead, it has reinforced it by the introduction of a corporate tax system applicable for Europe, namely the half-income method. The result creates new problems. All in all, we should ask if the tax reduction law in its current form can actually achieve its central goals.
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