The Free Democratic Party (FDP) in Germany believes that high income tax rates are one of the reasons why not enough skilled workers from abroad are coming to Germany. This, along with language barriers and bureaucratic hurdles, makes Germany unattractive compared to other industrialized countries. The FDP proposes offering tax incentives to attract more skilled workers from abroad, aiming to shed Germany’s image as a “high-tax country.” Their suggestion includes giving foreign skilled workers a higher tax-free allowance in the first three years of employment compared to domestic workers. Similar tax incentives for highly desirable foreign skilled workers already exist in other countries within Europe.
One of the models being considered is the system in the Netherlands, where employers can offer skilled workers a temporary tax-free allowance of a percentage of their annual salary. Austria also allows foreign skilled workers to deduct up to 10,000 euros in expenses related to living in the country. However, there are legal concerns about treating foreign skilled workers differently from domestic workers. While constitutional law experts believe that the current shortage of skilled workers could justify temporary tax incentives, the exact details and justification for the tax breaks need to be carefully assessed.
The German Ministry of Labor and Social Affairs has been making efforts to attract foreign workers, focusing on streamlining bureaucracy, easing access to the labor market through the Skilled Immigration Act, and promoting language skills. However, specific tax regulations for foreign skilled workers have not been addressed. There has been criticism from coalition partners, with the SPD and the Greens expressing concerns about the proposed tax incentives leading to unequal treatment of workers based on their origin, potentially affecting labor relations and fairness. The CDU focused instead on preventing highly educated German citizens from leaving the country by proposing tax benefits for overtime work and lower taxes on post-retirement income.
The AfD raised concerns about high taxes and social contributions leading to skilled workers leaving the country, but also criticized the FDP’s proposal as discriminatory towards domestic workers. The FDP, however, emphasized the need to address the issue of high taxes in Germany for all workers, including introducing tax benefits for overtime work and adjusting income tax rates automatically to inflation to combat the impact of rising tax brackets. Various political parties and interest groups have differing opinions on how to address the challenges of attracting and retaining skilled workers in Germany, with some advocating for broader tax reforms and others focusing on reducing bureaucratic hurdles in the immigration process. Ultimately, finding a balance between attracting foreign skilled workers and ensuring fairness and equality in the tax system remains a complex issue in the ongoing debate.
