Busting Business Tax Havens: CDU and Greens Dive into the Fray
CDU and Greens intend to combat tax evasion in the trade industry - CDU and Greens seek to combat corporate tax evasion in industries
Hey there! Let's talk about a hot topic in Germany - business tax havens. The CDU and Greens coalition in North Rhine-Westphalia (NRW) is determined to take on these tax havens in some municipalities and push for a higher minimum business tax rate.
This movement has gained momentum following the federal agreement by Union and SPD to bump up the minimum rate from 200% to 280%. The new motion, set to be submitted to the NRW state parliament next week, aims to tackle this issue head-on.
You know, the business tax is a crucial income source for cities and municipalities. The average tax rate in NRW municipalities hovers around 450%, with peaks reaching 700%. However, two municipalities, Monheim and Leverkusen, have a tax rate of 250%.
The CDU and Greens have been vocal about combating tax fraud and agreed in their coalition agreement to bust existing tax havens in municipalities. They plan to incorporate regulations into the municipal finance law to make these tax havens less appealing.
Moreover, the state's financial administration is ready to aid municipalities in identifying business locations. The new NRW state authority for combating financial crime already considers fighting tax fraud with shell companies in business tax havens as a top priority.
The CDU and Greens argue that these tax havens aren't just hurting neighboring municipalities; they also foster the establishment of letterbox companies. Particularly, municipalities on a financial consolidation path, which have had to raise tax rates accordingly, are most vulnerable to aggressive tax competition and potential losses in tax revenue due to these tax havens.
Christof Sommer, the managing director of the Association of Cities and Municipalities in NRW, aptly described the situation as a "vicious circle." Lower tax rates lead to tax competition, and in the end, no one benefits.
The Association of Towns and Municipalities in NRW has been advocating for a while now for the state government to combat unfair business tax competition and push for a comprehensive package of measures at the federal level. They believe that financial and justice authorities should support municipalities in combating illegal tax avoidance.
So there you have it! The CDU and Greens are gearing up to tackle business tax havens, one step at a time, aiming to create a fair playing field for all municipalities. Stay tuned for more updates on this exciting development!
P.S. On a side note, Germany's economic environment has shown some fluctuations, with the inflation rate in North Rhine-Westphalia crossing the 2% mark in May 2025. Meanwhile, the federal government has introduced tax schedule adjustments in January 2025 to offset bracket creep and clarify the application of the CbCR safe harbor in the Minimum Tax Adjustment Act (MinStGAnpG). These policies and others are all part of a broader economic strategy to manage public finances and stimulate certain sectors.
[1] North Rhine-Westphalia, Germany's most populous state, has a significant portion of corporate income tax and personal income tax allocated to it.
[2] The specific allocation of VAT in Germany is more complex and not detailed in the provided information.
[3] Ongoing discussions and proposals for tax reforms, such as the Minimum Tax Adjustment Act (MinStGAnpG), aim to clarify the application of the CbCR safe harbour.
[4] As of January 2025, the Federal Ministry of Finance implemented tax schedule adjustments to offset bracket creep.
[5] North Rhine-Westphalia's inflation rate (CPI YoY) increased to 2% in May 2025.
The CDU and Greens' initiative to combat business tax havens in North Rhine-Westphalia may encourage increased energy saving measures within municipalities, as higher tax rates can contribute to reducing expenses on electricity production and encourage businesses to focus on energy conservation. To facilitate this, the state's financial administration can offer aid in identifying business locations and tackling financial crimes related to tax fraud. Additionally, fostering a fair playing field for municipalities through the elimination of tax havens could potentially attract more capital from the finance and industry sectors, supporting the growth and sustainability of local businesses.
