Commission of Experts presents reform report
On 12 July, Wolfgang Schön, Chairman of the "Vereinfachte Unternehmensteuer" Expert Commission, presented the Commission's report and recommendations to Federal Finance Minister Christian Lindner.
(f.l.t.r.) Katja Hessel, Christian Lindner, Rudolf Mellinghoff and Wolfgang Schön. (Foto: Bundesministerium der Finanzen/photothek)
After nine months of work, the Commission of Experts that the Federal Ministry of Finance set up in July 2023 presented its final report under the chairmanship of Prof. Dr. Dr. h.c. Wolfgang Schön. The title "Besteuerung der Unternehmen: Einfacher und Effizienter (Taxation of Companies: Simpler and More Efficient)" contains more than 200 pages of extensive and detailed proposals for improving the taxation of companies. The proposals were drawn up by 13 experts from business and academia, including Guido Förster, Joachim Hennrichs, Johanna Hey and Deborah Schanz. The spectrum of measures ranges from income tax, corporation tax and trade tax to reorganisation tax and international tax law. In addition, there are proposals for changes to procedural law and practice.
A structural reform of the current corporate tax law
Based on the current law, which, in the Commission's eyes, prevents entrepreneurs and companies from fully realising their business potential, a wealth of regulatory proposals were identified that could make life easier for companies and tax authorities. This is not just about reducing bureaucratic burdens but primarily about replacing regulations that hinder entrepreneurial activity and penalise risky, innovative business strategies.
The Expert Commission criticises a tax policy that permanently suspects taxable companies of abuse at the German and European levels. In international taxation, in particular, the Commission calls for reducing excessive and, therefore, superfluous tax rules and a streamlined procedural law that supports flexible corporate tax law. The recommendations do not focus on organising the tax rate in income tax and corporate tax law. However, the Expert Commission notes that in an international comparison, a development of the tax burden on corporate profits towards 25 % appears competitive.
The reform demands at a glance
The Expert Commission's numerous reform demands cover four areas: (1) current corporate taxation, (2) reorganisations and restructuring, (3) international corporate taxation and (4) digitalisation, processes and tax audits.
In connection with the ongoing taxation of companies (1), one of the Commission's proposals is to allow both partnerships and corporations a free choice between the company's liability to corporation tax or the attribution of company profits to the shareholders. In the case of conversions and reorganisations (2), it should be possible to restructure companies in a far more tax-neutral manner than is currently the case. In the area of international corporate taxation (3), the Commission calls for a focus on its vital task: avoiding double taxation and other additional burdens on cross-border activities. The Commission's reform demands in digitalisation, processes and tax audits (4) include that tax procedural law should follow a risk-oriented approach ('traffic light system') in the interests of taxpayers and the administration. Exemption and refund procedures and application processes of all kinds should be made less bureaucratic. One proposal from the Expert Commission that is sure to meet with broad approval is the 'once-only' procedure, in which each piece of information only has to be submitted once to government authorities in order to be available to all relevant bodies.
Political implementation of the practical recommendations
In its work, the Expert Commission attached great importance to defining the most specific regulatory content possible for all the topics analysed. A particular achievement of the report is that it is only a tiny step toward the actual legislative implementation of almost all of the recommendations. The legislative bodies at the federal and state levels are responsible for taking this step. The Commission wishes politicians the courage to face the task of fundamentally reforming corporate tax law.
July 2024