Much has happened in recent years and decades in the area of company taxation. Within the group of OECD countries, corporation tax rates have been significantly reduced since 2000. The unweighted average of corporate tax rates of the countries in question fell from 32.2 to 23.5% between 2000 and 2019.
And the trend towards lower corporate tax rates is evidently far from over. Some countries, such as the US, have only recently implemented major tax reforms, while others are in the process of doing so or planning to do so in the near future. With globalization striding ahead over the past two decades, the mobility of production factors has risen noticeably. The pressure on countries to make local conditions more attractive is therefore intensifying all the more. This includes the area of corporate taxation. An international tax cutting contest has well and truly started.
The recent tax reforms in many industrialized countries and the plans for the coming years point in one direction: reduce corporate income tax rates – the only exception being Germany.
With less latitude for spending, the German government is faced with the conflicting situation of maintaining the „break-even“ and expanding social spending. In conditions of this kind, the issue of offering tax relief to German companies is probably not at the top of the priority list. As other industrialized countries and European neighbours reduce taxes or make plans for such tax reductions, Germany is in danger of falling behind and thereby increasingly jeopardizing its position as an interesting business location.