19.09.2013
Key Positions

Taxes

Tax policy is an instrument of modern government activity. It assures revenues and looks to bring income in line with expenses. Tax policy therefore always af- fects industry and society and is influenced more than almost any other area of activity by different political views. Keywords such as “tax equity” and “redistribution” are at the center of political debates—visible in current controversies between the Federal Government and the federal states and manifested in the political platforms of the parties for the federal elections in the autumn of this year.

Large sums are concerned: In 2012, Germany’s tax revenue amounted to around EUR 602 billion, representing an increase of around EUR 29 billion from the preceeding year. In the ten previous years, tax revenue of the Federal Government, federal states and municipalities has grown steadily, except in the crisis year of 2009.

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Based on the electoral platforms of the parties, one can expect the postulate of tax equity to also define the debate on tax policy in the coming legislative period: Should broad shoulders bear more weight through a reintroduction of the wealth tax, an increase in the top income tax rates, and an increase in inheritance and other taxes? Or should the tax burden for individuals and businesses be held constant in order to improve Germany’s competitiveness and status as a business location, thus creating and securing more jobs?

All parties agree on the necessity of continuing the course of budgetary consolidation, not least because of the painful experiences in other European countries. Budgetary consolidation is an important and challenging task: In the medium but particularly the long term, expenditures must be reduced and revenue improved. At the same time, however, it must be warranted that businesses can invest and Germans can consume and take financial precautions for the future.

In principle, structural changes to the tax framework would be unobjectionable. However, the changes should be made in a revenue-neutral fashion, not leading to any hidden tax increases. This applies, for instance, to the introduction of a common consolidated corporate income tax base in the EU and minimum European tax rates. And it likewise holds true for the introduction of a financial transaction tax, where hindrances to the competitiveness of businesses and detriment to consumers can hardly be averted. While the political parties are merely concerned with not letting themselves be blamed for mismanaging the financial crisis, there is a danger that a causeadequate division of the costs of the crisis might be neglected.

Yet, tax policy involves not only an abstract distribution of burdens but also the enforcement of tax claims. The insurance industry is open to all proposals that simplify tax legislation, create uniform standards, combat tax evasion and reform the tax administration, provided no new bureaucracy is thereby created. Less bureaucratic tax provisions would cost the state (almost) nothing, but would increase business efficiency and societal acceptance.

Our Positions
Financial transaction tax: Exempt old age pension
The insurance industry is critical of the EU Commission’s proposed directive to introduce a financial transaction tax within the framework of Enhanced Cooperation: A financial transaction tax can only bring about the controlling effects conceived for it if it is introduced on an international or at least a broad European level.
Neither insurance companies nor their products triggered or have reinforced the financial crisis. On the contrary, insurers and above all their customers are suffering from the consequences of the financial crisis, particularly as a consequence of low interest rates. A financial transaction tax should therefore be limited to the products that caused the crisis. At minimum, pensions should not be affected by the tax.
Corporate taxation: Further development of organic tax unities for true group taxation
Lawmakers have eased the formal requirements for establishing organic unities for tax purposes. Group companies will thus be able to net out their results within their groups. The insurance industry welcomes these measures because insurance companies are forced by supervisory law to manage their business lines as separate entities. In the next legislative period, the law on organic unities will be further developed into true group taxation.
For this purpose, profit and loss absorption agreements should be waived and minimum taxation mitigated and dispensed with again over the medium term. In no case, however, should it come to additional tax burdens, which lessen Germany’s competitiveness. For this reason, too, the insurance industry rejects the introduction of a capital tax on business assets.
FATCA: Release insurance companies from regulatory framework
The insurance industry emphatically supports all efforts to prevent tax evasion. However, such efforts should not lead to disproportionate burdens for companies. This also holds for the implementation of the US Foreign Account Tax Compliance Act (FATCA), which US tax authorities want to use to account for the investment income of US taxpayers living abroad. For data protection reasons alone, the duties of Ger- man companies must be regulated by way of a national law implementing the treaty announced between Germany and the US. The scope of application of the treaty must be reduced through appropriate limitations to a degree suitable for the insurance industry and funded occupational and private pension should be exempted. Unnecessary administrative expenses and complex reporting processes should be avoided.
Investment tax law: No new punitive taxation
The insurance industry favors preserving the current taxation system in the course of the upcoming revisions and amendments to the Investment Tax Act. In particular, no flat-rate or other new punitive taxation should be introduced. Disproportionate taxation of investment shares takes place at the expense of shareholders and thus ultimately the customers of insurers. Capital gains should also continue to first be taxed upon distribution. This procedure makes it possible for insurers as long-term investors to even out income over several years. Due to their obligation to render guaranteed benefits over the long term, life insurance companies in particular depend on earning steady income in the interests of their customers.