Progress and Continuing Need for Reform

On January 1, 2008 Germany enacted a comprehensive corporate tax reform. It combines a significant rate reduction with broadening the tax base to limit the revenue losses. A calculation and comparison of effective average tax rates in 18 countries shows that the reform improves Germany‘s competitive position since tax rates are a decisive factor when it comes to location decisions.

The regulations regarding the taxation of capital costs reduce the tax relief. Nevertheless, with an effective average tax rate of 28.9 percent Germany now scores in midfield. The improvements are, therefore, appreciated but should not be the end of the rope since other countries continue to reform their tax systems.