Hartmut Schwab, President of the Federal Chamber of Tax Advisors, has called for a fundamental simplification of German tax law, arguing that the country should transition away from targeted tax benefits and instead opt for lower taxes for everyone. Speaking to the “Welt” Schwab suggested that a decisive tax overhaul would necessitate eliminating the current commuter allowance, a change he anticipates will face significant political backlash.
He also questioned the efficacy of several popular tax reliefs. Specifically, Schwab expressed skepticism about the tax bonus provided for trade and craft services, suggesting that the reduction in this incentive would not significantly curb the commissioning of such work. He noted that many current regulations ultimately lead to “free-riding effects” that must be borne by the general public.
Furthermore, Schwab expressed reservations regarding the success of the so-called “investment booster” which the federal government introduced last summer to stimulate the economy. He doubts that clients are making extra investments solely because of the accelerated depreciation rules. He believes that quicker write-downs are mostly utilized when investments were going to happen regardless, suggesting the overall growth effect is likely minor. Similarly, he viewed existing tax incentives for corporate electric cars as largely ineffective, arguing that many clients would have either leased or opted not to purchase the vehicles regardless of the tax breaks.
Looking at the political landscape, Schwab stated that he does not believe the current governing coalition has the capacity to deliver a major tax reform, despite the clear need for one. He stated that a genuine reform remains unlikely unless the participating government parties are willing to set aside their core principles and focus on the broader overall strategy.