ZEW - Centre for European Economic Research

02/23/2024 | Press release | Distributed by Public on 02/23/2024 04:18

Enhancing Germany’s Attractiveness to Businesses through Tax Reform // Mannheim Tax Index Measures Effective Tax Burden of Companies

Mannheim Tax Index Measures Effective Tax Burden of Companies

In a country comparison, Germany, as a high-tax country, is well above the EU average. Only Spain and Japan are ahead of Germany in terms of tax burden.

The current Mannheim Tax Index of ZEW Mannheim underscores Germany's continued status as a high-tax country in global tax competition. The effective average tax burden for profitable investments is 28.5 per cent in 2023 - nearly 10 percentage points above the EU average. However, potential measures to significantly improve Germany's international standing imply substantial tax revenue losses and heightened risks of free riding.

"Due to a lack of substantial tax reforms in the past 15 years, Germany has seen a decline in its tax attractiveness for corporate investments compared to key economic partners. This concern is particularly pronounced in the context of an overall negative development of the German economy," highlights Julia Spix, a researcher in ZEW's "Corporate Taxation and Public Finance" Unit. Germany's high-tax profile has become all the more apparent with France reducing its corporate tax rate in recent years, and even the UK's increase in corporation tax to 25 per cent hasn't changed Germany's leading position.