Berlin. The German state grants citizens and companies significantly more tax breaks than is known. This is the result of a new study by two research institutes, which will be presented on Thursday in Berlin and was previously available to the Handelsblatt. According to this, the tax relief this year will total 76.5 billion euros - a total of four times as high as shown in the federal government's subsidy report.
The “Country Report on Tax Benefits” was prepared by Michael Thöne, Director of the Financial Research Institute at the University of Cologne, and Christian von Haldenwang, Project Manager at the German Institute of Development and Sustainability (IDOS). Your study takes the federal government's subsidy report as a basis, but also evaluates it.
The federal government itself estimates the tax relief in the subsidy report at 18.4 billion euros. However, this only includes the tax losses for the federal government. The subsidy report also lists measures whose effects are not quantified.
Von Haldenwang and Thöne are investigating all measures. These include the 107 tax breaks quantified by the government, but also 52 “subsidy-like offenses”. They derive the shortfall in revenue from the federal budget. “Based on the federal government’s draft budget for 2027, the quantified tax benefits (...) amount to a total of 76.5 billion euros in 2026, after 74.3 billion euros in 2025,” says the study.
The authors criticize that there has not yet been sufficient transparency regarding tax subsidies. “As a result, it is almost impossible for policymakers and the general public to obtain a complete overview of all existing tax expenditures, their fiscal costs and their impacts,” the study says.
The new figures are likely to fuel discussions within the black-red coalition, because it is under pressure to make austerity measures. Finance Minister Lars Klingbeil (SPD) only managed to present a draft budget for the coming year with difficulty. He will now be discussed in the Bundestag. In the years that followed, billions were missing from Klingbeil's financial planning.
The coalition is therefore also planning tax increases, for example on alcohol and tobacco, as well as the introduction of a plastic tax. A sugar tax on drinks was also discussed. The projects are controversial and have been causing trouble between the CDU/CSU and the SPD for weeks.
“The federal government is arguing about a sweet drinks tax that would bring in just one billion euros a year,” says study author Thöne. “We could mobilize many times over if we trimmed old tax privileges and saved hardly any effective tax subsidies.”
That's exactly not what's happening. The federal government is going in the wrong direction: Instead of reducing tax breaks, it has introduced a new one by reducing the energy tax on gasoline and diesel. “The renewed fuel discount based on the watering can principle should be the last example of a subsidy policy that we can no longer afford,” said Thöne.
The study also criticizes the subsidy policy. “Overall, Germany has been hesitant to push forward the reform of its tax breaks,” the paper says.
The coalition had negotiated a reduction in subsidies in the summer in order to close the budget gaps and create scope for tax reform. But she was only able to agree on a small amount. Point of contention: The Union primarily wants to cut financial aid, i.e. expenditure. According to the subsidy report, the federal government supports citizens and companies with financial aid worth 77.8 billion euros. A large part is made up of support due to high energy costs.
The Social Democrats, however, wanted to concentrate on tax relief when reducing subsidies. From the Union's perspective, abolishing them would de facto lead to additional burdens on taxpayers. That's why they only wanted to accept this to finance tax relief elsewhere.
In the study, Haldenwang and Thöne also list the largest tax subsidies. The first place here is the sales tax exemption for medical treatments. It amounts to 25.6 billion euros for the state as a whole, including 13.5 billion euros for the federal government. The federal government, however, does not see this tax exemption as a subsidy.
In second place for Haldenwang and Thöne are the tax privileges for company heirs, which are ranked first in the federal government's subsidy report. They amount to 8.8 billion euros. In third place among economists is the regulation under which church tax can be claimed against income tax. According to the study, this leads to a reduction in revenue of 4.4 billion euros. The federal government does not take this into account either.
The study and the subsidy report are identical when it comes to many other tax benefits: relief from energy taxes for companies, the reduced sales tax rate for culture and entertainment, and tax privileges for surcharges for night and holiday work. The abolition or reduction of these tax advantages has been discussed again and again in recent years.
The study cites three reasons for the increase in tax relief: First, they are used as short-term effective crisis management measures, for example in the corona pandemic or the energy crisis. Secondly, they would serve to support the transformation to a climate-neutral economy. And thirdly, they would be used to promote economic growth or to compensate for high energy costs.
