Press release

"Tax burden is not going to decrease"

Yesterday, Mr Friedrich Merz, tax expert and Member of Parliament of the CDU, and Professor Schön from the Max Planck Institute for Intellectual Property, Competition and Tax Law, discussed aspects of a German tax reform at the Governance Forum of the Hertie School of Governance.

Friedrich Merz modified his earlier suggestions concerning tax reforms and clarified that the overall tax burden for the German people does not leave any scope for decrease in the future. The annual structural deficit of all federal public households in Germany of EUR 120 billion could not be compensated for by any increase in the value added tax (VAT). Furthermore, Mr Merz claimed that corporate and income taxes should be based on different concepts of how to treat the respective tax subjects, and thereby distanced himself from the principle of equal treatment currently prevailing in the German tax system. He identified the reform of the corporate tax as being of major importance. He also suggested to either abolish or rather substitute the excise tax in view of the federal communities' financial plight and the need for redistribution within the tax system. Mr Merz spoke against a general tendency to get lost in illusions: "German companies do not pay the taxes they are supposed to pay, but rather they pay those taxes that they want to pay. The losers of the collapse of the social security system will be the large middle classes, the employees. Hence, the wages need to be disconnected from the social security payments very urgently."

Professor Kurt Biedenkopf, Chairman of the Board of Trustees of the Hertie School of Governance (HSoG), who presented the Governance Forum, urged the politicians to handle the given insights carefully and responsibly. He also encouraged them to use their mandate and legitimacy for consistent action. As a first step, he suggested that all employees should be made familiar with the actual amount of their tax and social security payments, or that they should even receive the latter. Only then would they be in a position to really conceive of their own value added.

The Hertie School of Governance (HSoG) hosts the Governance Forums to address topical issues of governance. In September 2005, the first thirty students from all over the world will start their studies of the Master of Public Policy degree at the HSoG.