At the turn of the year, the Foundation for Family Businesses, together with the ifo Institute, presented a corporate survey on tax policy and location attractiveness. The result is unequivocal: Germany is too expensive and no longer competitive as a business location.

There is nothing new under the sun. In their year-end Annual Monitor, the Foundation for Family Businesses and the ifo Institute once again went straight to the heart of the matter. A total of 1,705 companies across all sectors and size categories were surveyed on their assessment of current tax policy and Germany's attractiveness as a business location. The evaluation of this corporate panel—1,358 of which were traditional family-owned businesses—turned out to be devastating, as expected.

Overburdened Labor Factor

More than 80 percent of companies perceive the overall tax and contribution burden—particularly in the area of personnel costs, i.e., wage taxes and social security contributions—as far too high. The heavy burden on the employee side is especially criticized by smaller family-owned businesses. It has become increasingly difficult to grant wage increases when the fiscal authorities take the lion's share and key performers are bled ever more heavily with each pay raise due to the continuous increase in social security contribution ceilings.

This assessment is shared by Professor Rainer Kirchdörfer, member of the Foundation's executive board, who comments on the study:
"Our new Annual Monitor shows just how much employers and employees are pulling in the same direction. It is precisely the high taxes on labor that paralyze both sides and drain the joy from performance. High-tax Germany has also lost ground here."

Two-thirds of surveyed executives complain about excessive income tax rates. Income tax is particularly relevant for partnerships—and by international standards it is clearly too high. A recurring grievance is also the complexity of Germany's tax system. The familiar quip holds that roughly two-thirds of global tax law literature originates in the Federal Republic. Even if exaggerated, the message is clear: Germany is a bureaucrat's paradise.

Currently, 5.4 million people work in the public sector—around half a million more than five years ago. This despite technological progress, artificial intelligence, and increasing automation of internal processes.

The Bureaucracy Reduction Classic

A tangible reduction in bureaucracy, including tax law, has been overdue for decades. Yet no federal government dares to tackle this hot potato. German bureaucracy has grown too powerful, evolving at all levels into a state within the state. At the same time, policymakers view the public sector as a kind of buffer for a labor market that has slowly but steadily tipped.