ZEW researchers comment on the figures published by the OECD on the corporate tax burden in Germany compared to other countries

Referring to the fee and tax rates the OECD published last year, the German Federal Ministry of Finance (BMF) pointed out that the tax burden in Germany is low in comparison to the international average. However, research on corporate taxation conducted by the Mannheim Centre for European Economic Research (ZEW) does not support the government's positive assessment of the tax conditions in Germany. On the contrary, corporate earnings are taxed at a higher rate in Germany than in most other European states. This is indicated by the EU Commission's recent report on corporate taxation, which was published in collaboration with ZEW and the University of Mannheim.

The OECD computed the tax and contribution ratio by comparing tax revenues and the gross domestic product. Such macroeconomic figures are to a great extent determined by a number of other factors which have nothing to do with the impact of corporate decisions. The income tax rate is calculated by using the wage tax, for example. The figures of the OECD, therefore, do not suggest that the corporate tax burden is low in Germany. Accordingly, the actual German tax burden, as calculated in the report of the European Commission, is at the upper end of the scale (see chart).

It can be concluded that the OECD analysis provides no justification for further delay to providing tax relief for German companies. With regard to the planned German Tax Benefits Reduction Act, it is likely that a further increase of the effective tax burden would compromise the economic framework conditions, turning Germany into a less attractive location for businesses and investments.

Statement- long version

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