Why does the government actually levy taxes?

Tax policy in the COVID-19 crisis

The corona crisis has revived the debate about tax relief for companies. In fact, reforms in Germany have significantly reduced corporate taxation for 20 years. The aim is to survive in international tax competition. However, the new economic geography assumes that economies with a high location attractiveness can afford to levy high taxes. A stable economic framework, a well-developed infrastructure and a well-trained workforce are much more important when choosing a location for companies. Tax policy in the COVID-19 pandemic should accordingly focus on improving these location factors.

As a result of the US tax reform in 2017 and economic problems in the wake of the COVID-19 pandemic, there are increasing voices in Germany calling for a structural reform of corporate taxation (e.g. Fuest and Peichl, 2020; Homburg, 2020; Hüther, 2020; Welling, 2018 ; Scientific Advisory Board at the Federal Ministry of Finance, 2018; Wolff, 2018). It is argued that the US tax reform could have a significant impact on companies' investment decisions (Heinemann et al., 2017, 3). In the 2018 coalition agreement, the grand coalition planned to prevent tax competition between EU countries and to provide a "European response to international changes and challenges [in corporate taxes], not least in the USA" (CDU et al., 2018, 7-8, 13).

These planned changes were made more concrete by naming four core elements of a possible corporate tax reform by Federal Minister of Economics Peter Altmaier (CDU): 1. Improvements and reliefs in the retention benefits for partnerships as well as the introduction of an option model for corporate taxation; 2. Improvement and increase of trade tax credit against income tax as well as introduction of the creditability of trade tax against corporation tax; 3. moderate reduction in corporate tax rate; 4. Gradual abolition of trade tax additions (Federal Ministry for Economic Affairs and Energy, 2019; CDU / CSU parliamentary group, 2019). The reform proposals recently brought up again by the Bavarian Prime Minister Markus Söder (Börse Online, 2020) go in a similar direction. The core of all these proposals is the endeavor to reduce the tax burden on companies and especially corporations in order to be able to keep up with the international competition between locations. Even if the federal government's reform packages to date do not provide for any significant relief in corporate taxes (Beck Online, 2020a, 2020b; Korn, 2020), it can be assumed that the discussion about a sustainable reduction in the tax burden on companies will pick up speed again in the future.

This discussion is based on a development that began with the expiry of the wealth tax in 1997 and the reform laws of the red-green federal government from 1999 to 2002 and continued in the 2008/2009 corporate tax reform (Bach, 2018). Whereas the nominal tax burden on reinvested profits of corporations with a trade tax assessment rate of 400% and neglecting church tax in 1998 was 56.2%, it is now 29.9%. In the case of distributed profits from corporations, the nominal tax burden is reduced from 63.3% to 48.3%, while the peak tax burden on partnerships has also decreased significantly from 58.0% to 47.5% (own calculations). If one also takes into account the abolition of the trade capital tax, the de facto abolition of the wealth tax, the introduction of the withholding tax in 2009 as well as the massive tax breaks for inheritance of company assets, it becomes clear that companies and their shareholders in particular are considered to have winners from the tax reform policy of the last 20 years can.

From this perspective, the reform proposals currently being discussed do not necessarily appear socially balanced. The structural reform of the German tax system that has been called for also means, in particular, a redistribution of the tax burden on labor income and consumer spending, while the burden on corporate profits and capital income is significantly reduced. The question arises whether a tax policy oriented in this way still corresponds to the basic idea of ​​taxation based on performance. It also appears worrying that such a policy would negate and possibly further intensify the division of society into rich and poor, which has been criticized in public discourse (Bartels, 2018).

Tax competition and new economic geography

It is fundamentally undisputed that competitive pressure in the area of ​​corporate taxation has increased recently. With the “Tax Cuts and Jobs Act” on January 1, 2018, the USA reduced the federal income tax from 35% to 21%. In the OECD countries, the average corporate tax rate fell from around 32% to 24% between 2000 and 2019. The average tax rate for companies in the EU is around 21% (OECD, 2019). Corporate taxes have been reduced significantly in recent years in Belgium (to 25%), Great Britain (to 19%), Japan (to 29.7%) and Italy (to 27.8%), among others. Further tax cuts are planned in France, Greece, the Netherlands, Norway and Sweden (see also Figure 1). Germany will not be able to completely escape the resulting competitive pressure (Schreiber et al., 2018, 242). However, the question arises as to what role taxation has in general when choosing a location and making investments.

illustration 1
Development of tax rates on corporations in OECD countries

Surveys of companies usually come to the result that taxes are an essential but by no means the most important location factor. According to a meta study by the Ifo Institute Dresden, taxes and duties are classified as the fifth most important factor for the choice of location between different municipalities (Ebertz et al., 2008, 18). The availability of qualified workers, proximity to customers, wages and transport links / infrastructure are of greater importance. A study by the Kreditanstalt für Wiederaufbau, which takes significantly more hard and soft location factors into account, the taxation even ranks in the lower mid-range of the relevant location factors (Landua et al., 2017). The Ease of Doing Business Index published annually by the World Bank places Germany in 22nd place in 2020, with taxes being just one of many factors here too (Linnemann and Weiß, 2019; World Bank, 2020). International studies that compare several location factors come to similar results (e.g. Kimelberg and Williams, 2013; MacCarthy and Atthirawong, 2003; Vlachou and Iakovidou, 2015). While the purely tax literature can determine a significant influence of taxation on location selection decisions and in particular direct investments (Feld and Heckemeyer, 2011; Hebous et al., 2011), its importance on the location selection of international companies should not be overestimated.

The economic geography for which Paul Krugman was awarded the Nobel Prize for Economics in 2008 offers a theoretical basis for the relevance of corporate taxation for the choice of location. According to the theory of economic geography, taxes can be interpreted as a price for the attractiveness of an economic region (Baldwin and Krugman, 2004; Hühnerbein and Seidel, 2010). Regions and economies with a high location attractiveness can accordingly enforce high taxes on the market for investments, while economically less attractive regions can only afford low tax burdens. Such a theory corresponds to the empirical finding and can also be justified by a series of simple observations:

  • For the German trade tax, economically attractive cities charge significantly higher rates than less attractive municipalities in rural areas. Regional metropolitan areas such as Munich (490%), Hamburg (470%) or Frankfurt a. M. (460%). 1
  • Large economically attractive countries generally levy significantly higher corporate taxes than smaller ones with smaller markets and less attractive locations. In 2019, for example, the tax burden of large, attractive countries such as Germany (29.9%), France (32%), Italy (27.8%) or the USA (New York State, 27.5%) was significantly higher than that in smaller or Eastern European countries such as Bulgaria (10%), Lithuania (15%) Poland (19%), Romania (16%) or the Czech Republic (19%) (Ernst & Young, 2019; OECD.Stat, 2020).
  • As a state with attractive economic regions (California, New York), the USA was able to afford the highest corporate taxes in the western world for years without any noticeable loss of growth or economic importance. It is also noteworthy that companies in the digital economy that are considered mobile (Apple, Google, Facebook) have their headquarters in the state of California, a region that has had one of the highest corporate taxes in the world for the past 15 years

Tax competition with the US and Europe

First of all, it can be said that the nominal tax burden of most economically attractive federal states, including the State Corporate Income Taxes, does not differ too dramatically from the German reference value of 29.83%. The State Corporate Income Taxes result in total charges of 27.5% for the State of New York and 29.84% for California.3 In addition, local taxes (around 8.85% for New York City (Federal Ministry of Finance, 2019, 17) ) and wealth-related taxes that do not apply in Germany.

In addition to the pure lowering of corporate tax rates, the “Tax Cuts and Jobs Act” also contains special tax depreciation for real investments and preferential tax rates for income from intangible assets, which further reduce the effective tax burden in the USA. The literature therefore argues in part with effective tax burdens of less than 25% (Haas and Wünnemann, 2018) .4 However, these relieving effects of the tax reform are also offset by burdensome factors that can expand the tax base far beyond the profit made in the USA and thus comparable to trade tax additions imply a taxation of profit-independent income components. For example, the Base Erosion and Anti-Abuse Tax (BEAT) is in fact an alternative minimum taxation system that may considerably limit the tax deductibility of business expenses with a foreign element. In addition, the taxation of Global Intangible Low-Taxed Income means a considerable expansion of the taxation for income from intangible assets.5 While the special depreciation expires in 2022, the burden incurred by BEAT will gradually increase until 2026.

This makes it at least doubtful that the US tax reform will have a negative impact on macroeconomic development and investment activity in Germany. In particular, the question arises as to the relevance of taxation as a location factor when it comes to the question of whether European companies are building up production and research capacities in the USA or even relocating their headquarters. Survey data suggest that location factors such as the availability of workers, supplier networks, opportunities for cooperation with research institutions, labor costs or the infrastructure are more important for long-term strategic decisions. It also seems unclear how sustainable the current US government's policy is. Against the resistance of the Democrats, the tax reform was literally whipped through the committees and led to a massive increase in national debt even in times of economic boom. In the long term, this position is unlikely to be sustained in terms of fiscal policy. The partly erratic policies of the Trump administration should not necessarily help to make the USA more attractive as a business location.

In a European comparison, Germany is now a high-tax country. Belgium (25%), Italy (27.8%), Greece (28%) and Great Britain (19%) have already reduced their tax burdens and are below what is usually assumed as a reference value German tax burden of 29.8%. The situation is likely to get worse because some European countries are planning further tax relief for companies (Schreiber et al., 2018, 242-243). At first glance, this suggests a reduction in the corporate tax burden in Germany.

However, when making these considerations, Germany's competitive position in the European Union should also be taken into account. Since reunification, Germany has been the largest and most important economy in the EU with a high level of financial stability. Germany has developed much more dynamically than Italy or France in the last ten years. Against this background, it seems entirely justified in terms of Krugman's economic geography that Germany demands a higher price for its attractive investment location6 than its European competitors. The fact that economically weaker and less attractive countries levy lower corporate taxes should not unsettle Germany. A special situation is likely to exist in comparison to Great Britain. From an economic geography perspective, the dramatic decrease in the corporate tax burden to 19% reflects the greatly reduced attractiveness of the UK as a result of Brexit (Zeit, 2019). Another important aspect for German tax policy should be the influence that Germany exerts on its European neighbors. As an economic heavyweight on the European continent, German tax policy is also important for its neighbors. If Germany takes an active part in the current undercutting competition, then this is likely to put other European countries under pressure again.

Distribution of income and tax burdens

While at the beginning of the 1950s around 17% of total tax revenue was accounted for by corporate taxes (trade tax, corporation tax) and around 6% for taxes on wealth and capital transfers (e.g. real estate tax, wealth tax, inheritance tax, real estate transfer tax), it was in the years 2013 to In 2016 it was still around 10% (corporate taxes) or 4% .7 In the same period, the importance of private wealth in relation to national income has risen significantly.8 If private wealth was less than twice the gross domestic product in 1950, this has turned out to be this ratio more than doubled to more than four times by 2010, with a continuing upward trend (Piketty and Zucman, 2014, 1255). Bach (2018) finds evidence of an increasing tax burden on consumption and labor income, while the share of taxes on wealth and corporate profits in total tax revenue is declining.

At the same time, widely recognized research results by Thomas Piketty and other economists show that the concentration of wealth and income among the top of the population in Germany as well as in the entire western world has risen sharply in recent decades (Piketty, 2020). According to calculations by Bartels (2019), between 1961 and 2014 the share of the highest income 10% of the national income rose from around 30% to over 40%, while at the same time the share of the lowest income 50% fell from around 32% to 15%, as in Figure 2 can be seen (Bartels, 2019, 686). An increased polarization of income has been observed especially since the mid-1990s (Bartels, 2018).

Figure 2
Share of income groups in national income

Source: Bartels, 2018, 56.

Such a development is difficult to reconcile with ideas of distributive justice (Hey, 2017, 633) or the principle of performance. Accordingly, it is precisely the financially capable sections of the population who are ultimately identical to the wealthy and in particular the shareholders of companies (Bartels, 2019), should contribute more to the financing of tax revenue than financially less capable “poor” sections of the population. This also speaks in favor of a progressive division and de-solidarization of German society (Hurst, 2018; Klein, 2018), which is currently determining the social debate and is apparently also being reflected in the tax system. The plans currently under discussion for a further reduction in the tax burden on companies threaten to exacerbate these tendencies.

Tax policy in the context of the COVID-19 pandemic

The previous measures of the COVID-19 economic stimulus package do not provide for any permanent reductions in tax rates for companies (trade tax, corporation tax) (cf.Beck Online, 2020a, 2020b; Korn, 2020). In addition to measures to stimulate consumption (temporary reduction in VAT, child bonus of 300 euros, reduction in the EEG surcharge, temporary increase in the tax relief for single parents), the promotion of electromobility (purchase bonuses for electric vehicles, increase in the maximum gross list price for a preferential taxation of the private use of electric vehicles to 60,000 euros, expansion of charging networks), in particular, income tax relief to conserve liquidity and tax incentives for investments are provided.

In order to preserve the liquidity of companies, the loss carryforward for the years 2020 and 2021 is to be increased to 5 million euros (10 million euros in the case of joint investment by spouses). In addition, the deadlines for the use of investment deductions in accordance with Section 7g and the reinvestment deadlines for reserves in accordance with Section 6b EStG are temporarily extended by one year. In order to strengthen investment incentives for companies, degressive depreciation of a maximum of 25% for investments in 2020 and 2021 as well as an increase in the research allowance from EUR 2 million to EUR 4 million were implemented. Permanent tax relief results from the trade tax. The allowance for additions in accordance with Section 8 No. 1 of the Trade Tax Act has been increased to EUR 200,000, which is also intended to compensate for the inflation effects of previous years (the allowance has not been adjusted since 2008). In addition, as a reaction to the increased rate of assessment of the trade tax, the credit factor according to § 35 Income Tax Act was increased to a maximum of 4, which reduces the risk of double taxation for sole proprietorships and partnerships. These measures appear to be entirely appropriate, on the one hand to reduce liquidity problems in the COVID-19 pandemic and on the other hand to generate investment incentives in the sense of an anti-cyclical economic policy. In relation to tax investment incentives from previous economic crises in the USA, it should nonetheless be considered whether the legislature should not rely even more on accelerated depreciation regulations in order to strengthen countercyclical investment incentives.

Both in the financial crisis and in the “Tax Cuts and Jobs Act”, the USA made extensive use of bonus depreciation in order to increase the incentive for short-term investments. Such funding instruments are comparatively cheap for the state at the current interest rates, since depreciation is only accelerated (approx. 50% special depreciation in the year of investment, the other 50% of the investment amount is depreciated over the useful life). Companies save taxes due to increased depreciation in the current period, but at the same time reduce their depreciation potential for future periods. Ultimately, this leads to a shift in tax revenue into the future, which is relatively unproblematic for the state as long as the interest rates for government bonds are close to zero or even negative. At the same time, however, such a policy relieves companies whose capital costs are significantly higher.

Previous empirical studies make it clear that such special depreciations, which are limited in time, have a much stronger influence on the investment activity of companies than permanent reductions in corporate tax rates. This can be attributed to the fact that strong forward shifting effects are to be expected from investments and only companies benefit from the support that actually invest in the crisis. In the case of temporary special depreciation, the estimated elasticities of investment activity in relation to tax incentives are between 6 and 14 (Eichfelder and Schneider, 2018, 24-25; House and Shapiro, 2008; Maffini et al., 2019; Ohrn, 2018; Zwick and Mahon , 2017), but only between 0.25 and 1 for permanent adjustments in tax rates or capital use costs (Auerbach and Hassett, 1992; Bond and Xing, 2015; Chirinko et al., 1999; Cummins et al., 1994). Accordingly, temporary special tax depreciation for areas with a backlog (such as the digital infrastructure) would be much more suitable for promoting investments than a permanent reduction in the tax burden.

A study by the Institute for Macroeconomics and Economic Policy (IMK) and the Institute of German Economy (iw) also makes it clear that the public sector has massively neglected investments in public capital over the past two decades. This particularly includes areas such as education, transport, communication networks and decarbonisation. The related investment needs are estimated at 450 billion euros for the next ten years (Bardt et al., 2019).


Politicians, scientists and business representatives repeatedly call for a lower tax burden for German companies and justify this with the competitiveness of Germany as a location. In view of the fact that it is still highly attractive, however, such measures do not appear expedient. In particular, a reduction in corporate taxes would not be suitable for ensuring the liquidity of companies in the current crisis situation, since insolvent companies do not generate any profits. A (permanent) reduction in corporate tax rates would also be unsuitable for generating the urgently needed countercyclical investment incentives for companies. In contrast, temporary measures to increase investment incentives, such as special depreciation or research allowances, some of which have already been initiated by the COVID-19 stimulus package, appear more effective. Ideally, tax measures of this kind should focus on sectors and areas in which there is a high need for investment (e.g. digital infrastructure, digital processes, decarbonisation of German industry, infrastructure for electromobility).

Unfortunately, the previous debate often negates the fact that corporate taxation is by no means the most important factor in the choice of location, but rather proves to be a moderately relevant location factor in surveys. It is also neglected that the (digital) public infrastructure, the digitalization of society and the sustainability of energy generation are location factors that are significantly more important than the income tax burden on companies (EY, 2020; World Bank, 2020). Accordingly, from the point of view of Germany's attractiveness as a location, it would probably be more expedient to dismantle existing tax concessions for privileged layers (such as the non-taxation of speculative profits in private assets or the massive concessions for business assets with inheritance tax, Eichfelder, 2018, 2400 ff.) And at the same time public ones Massively increase investment activity in the areas explained in order to reduce the identified investment backlog for public investments.

Such a policy would in all probability increase Germany's attractiveness as a location and at the same time reduce the massive and growing inequality in the distribution of income and wealth. It must be taken into account that shareholders in companies and the wealthy have already benefited greatly from the tax reform efforts of the last 20 years and are at the same time economic winners of globalization. The beneficiaries of a new corporate tax reform would therefore be precisely those actors who have already been able to significantly improve their economic positions in recent years. A tax policy that ignores such connections and problems permanently risks social cohesion, which is probably one of the most important factors for Germany as a business location.

  • 1The direct local competitive situation seems to be particularly important here. For example, there are also high rates of assessment in eastern German regional conurbations such as Magdeburg (450%), Halle (450%), Leipzig (460%) and Dresden (450%).
  • 2 Before the US tax reform, the federal income tax of 35% was supplemented by a state income tax of 8.84% and any local taxes. The total tax burden was therefore over 40% and was thus clearly at the top of the international tax burden for companies (see also Federal Ministry of Finance, 2019, 16-17).
  • 3 The State Corporate Income Taxes of the states concerned are 6.5% for New York and 8.84% for California. For other countries there are in some cases even higher burdens. For example, the Corporate State Income Tax in Pennsylvania is 9.99%. In 23 states there are higher burdens than in New York (Tax Foundation, 2020).
  • 4 Heinemann et al. (2017) determine an effective average tax rate of 22.7% in a first analysis of the US tax reform taking into account depreciation allowances (Heinemann et al., 2017, 1-5).
  • 5 A more detailed description of these regulations can be found in Linn (2018) or Schreiber et al. (2018).
  • 6 According to the European Attractiveness Survey 2020, Germany ranks third in Europe among the most attractive economic regions in terms of direct investment (Ernst & Young, 2020).
  • 7 Own calculations based on cash tax revenues by tax type from 1950 to 2017 (Federal Ministry of Finance, 2018; Federal Statistical Office, 2019, 281).
  • 8 However, this consideration does not apply to corporate profits. According to the national accounts, the share of national income from entrepreneurship and wealth decreased from around 42% to 32% between 1950-1953 and 2013-2016. However, this only explains half of the decline in the share of corporate taxes in German tax revenue from around 17% to 10% in the same period (see Federal Statistical Office, 2019, 281).


Auerbach, A. J. and K. A. Hassett (1992), Tax policy and business fixed investment in the United States, Journal of Public Economics, 47(2), 141.

Bach, S. (2018), 100 Years of the German Tax System: Revolution and Evolution, Working Paper, DIW Berlin.

Baldwin, R. E. and P. Krugman (2004), Agglomeration, integration and tax harmonization, European Economic Review, 48(1), 1.

Bardt, H., S. Dullien, M. Hüther and K. Rietzler (2019), For a Solid Financial Policy: Enabling Investments, IMK report, 152.

Bartels, C. (2018), Distribution of Income in Germany from 1871 to 2013: Another Rising Polarization Since Reunification, DIW weekly report, 85(3), 51.

Bartels, C. (2019), Top incomes in Germany, 1871-2014, Journal of Economic History, 79(3), 669.

Beck Online (2020a), Corona economic stimulus package: What help is planned for whom, Beck Online Redaktion beck-aktuell, June 4th, becklink 2016506, https://rsw.beck.de/aktuell/daily/meldung/detail/corona-konjnungpaket-welche-hilfe-fuer-wen-geplant-sind (June 24, 2020).

Beck Online (2020b), Federal Government gives the green light for Corona stimulus package, Beck Online Redaktion beck-aktuell, June 12th, becklink 2016574, https://rsw.beck.de/aktuell/daily/meldung/detail/bundesregierung-gibt-gruenes-licht-fuer-corona-konjektivenpaket (June 24, 2020).

Börse Online (2020), Söder calls for tax cuts and tax reform due to the corona crisis, https://www.boerse-online.de/nachrichten/aktien/soeder- sucht-wegen-corona-krise-steuersenkungen-und-steuerreform-1029624602 ( September 26, 2020).

Bond, S. and J. Xing (2015), Corporate taxation and capital accumulation: Evidence from sectoral panel data for 14 OECD countries, Journal of Public Economics, 130, 15.

Federal Ministry of Finance (2018), cash-based tax revenue by tax type 1950 to 2017, https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Steuerschaätze_und_Steuereinigungen/2-kassenmaessige-steuereinnahm-nach-steuerarten-1950-bis-2017 .html (February 3, 2020).

Federal Ministry of Finance (2019), The most important taxes in international comparison 2018, https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/2019-08-08-die-wichtsten-steuern-im-internationalen-vergleich-2018 -ausgabe-2019.pdf? __ blob = publicationFile & v = 9 (January 20, 2020).

Federal Ministry for Economic Affairs and Energy (2019), Altmeier names four core elements of a corporate tax reform, https://www.bmwi.de/Redaktion/DE/Pressemitteilungen/2019/20191115-altmaier-benennt-kernelemente-unternehmenssteuerreform.html (January 20, 2020 ).

CDU, CSU and SPD (2018), coalition agreement 2018, https://www.bundesregierung.de/resource/blob/656734/847984/5b8bc23590d4cb2892b31c987ad672b7/2018-03-14-koalitionsvertrag-data.pdf?download=1 (20. June 2020).

CDU / CSU parliamentary group (2019), position paper "Modernization of corporate taxation in Germany" of the CDU / CSU parliamentary group in the German Bundestag, https://www.cducsu.de/sites/default/files/2019-11/Positionspapier%20zur % 20Modernization% 20der% 20Company Taxation_17102019 ..... pdf (January 22, 2020).

Chirinko, R. S., S. M. Fazzari and A. P. Meyer (1999), How responsive is business capital formation to its user cost? An exploration with micro data, Journal of Public Economics, 74(1), 53.

Cummins, J. G., K. A. Hassett and R. G. Hubbard (1994), A reconsideration of investment behavior using tax reforms as natural experiments, Brookings Papers of Economic Activity, 25(2), 1.

Ebertz, A., M. Kriese, M. Thum and E. Seitz (2008), Assessment of local location factors for households and companies in Saxony: Development of indicators for checking the demographic suitability of funding projects of the Saxon Aufbaubank: Expert opinion on behalf of the Saxon Aufbaubank , Ifo Dresden Studies, 46.

Eichfelder, S. (2008), partial tax calculation after the corporate tax reform 2008/2009, The tax advisor, 59, 199.

Eichfelder, S. (2018), Does Germany Need a New Corporate Tax Reform? German tax law, 56(45), 2397.

Eichfelder, S. and K. Schneider (2018), How do tax incentives affect business investment: Evidence from German bonus depreciation, arqus working paper, 231.

Ernst & Young (EY, 2019), EY worldwide corporate tax guide 2019, https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/tax/hc-alert/ey- worldwide-corporate-tax-guide-2019.pdf (June 24, 2020).

EY (2020), EY Attractiveness Survey Europe 2020, https://assets.ey.com/content/dam/ey-sites/ey-com/en_gl/topics/attractiveness/ey-europe-attractiveness-survey-2020-v3 .pdf (June 24, 2020).

Feld, L. P. and J. H. Heckemeyer (2011), FDI and taxation: A meta-study, Journal of Economic Surveys, 25(2), 233.

Fuest, C. and A. Peichl (2020), Eight Elements of a Fundamental Reform of the Tax and Transfer System, Economic service, 100(3), 162.

Haas, W. and M. Wünnemann (2018), Tax policy in the 19th legislative period: Global tax competition is an occasion for necessary structural reforms, German tax law, 56(8), 377.

Hebous, S., M. Ruf and A. Weichenrieder (2011), The effects of taxation on the location decisions of multinational firms: M&A versus greenfield investments, National Tax Journal, 64(3), 817.

Heinemann, F., O. Pfeiffer, T. Schwab, C. Spengel, M. Olbert and K. Stutzenberger (2017), Analysis of US corporate tax reform proposals and their effects for Europe and Germany, ZEW reports and research reports.

Hey, J. (2017), Tax Law Between Redistribution and Location Policy. Tax policy tasks of the 19th legislative period, German tax newspaper, 105(18), 632.

Homburg, S. (2020), Tax Reductions - If Not Now Then When ?, Economic service, 100(3), 157.

House, C. L. and M. D. Shapiro (2008), Temporary investment tax incentives: Theory with evidence from bonus depreciation, American Economic Review, 98(3), 737.

Hühnerbein, O. and T. Seidel (2010), Intra-regional tax competition and economic geography, The world economy, 33(8), 1042.

Hurst, F. (2018), Study on Social Inequality: Poor Here, Rich There, daily News, May 23, https://www.tagesschau.de/inland/soziale-unleichheit-101.html (June 22, 2020).

Hüther, M. (2020), Time for Growth Policy, Economic service, 100(3), 165.

Kimelberg, S. M. and E. Williams (2013), Evaluating the importance of business location factors: The influence of facility type, Growth and Change, 44(1), 92.

Klein, J. (2018), Social Mixture: The Divide Is Growing, Frankfurter Allgemeine Zeitung, June 2, https://www.faz.net/aktuell/politik/inland/interview-mit-sozialforscher-die-spaltung-wird-groesser-15618171.html (June 22, 2020).

Korn, C. (2020), The Second Corona Tax Aid Act at a Glance, German tax law, 58(26), 1345.

Landua, D., S. Wagner-Endres and U. Wolf (2017), Short study on municipal location factors: results based on data from the Difu project “Coordinated Company Survey”, KfW Research.

Linn, A. (2018), The US Corporate Tax Reform and Its Effects on German Corporate Tax Law, German tax law, 56(7), 321.

Linnemann, N. and F. Weiß (2019), Does Germany (Not) Need a Corporate Tax Reform ?, International tax law, 28(17), 692.

MacCarthy, B. L. and W. Atthirawong (2003), Factors affecting location decisions in international operations - A Delphi study, International Journal of Operations & Production Management, 23(7), 794.

Maffini, G., J. Xing and M. Devereux (2019), The impact of investment incentives: Evidence from UK corporation returns, American Economic Journal: Economic Policy, 11(3), 361.

OECD (2019), Tax policy reforms 2019, https://www.oecd.org/tax/tax-policy-reforms-26173433.htm (January 8, 2020).

OECD.Stat (2020), Tax database, Table II.1, https://stats.oecd.org/Index.aspx?QueryId=78166 (24.June 2020).

Ohrn, E. (2018), The effect of corporate taxation on investment and financial policy: Evidence from the DPAD, American Economic Journal: Economic Policy, 10(2), 272.

Piketty, T. (2020), Capital in the 21st century, Beck.

Piketty, T. and G. Zucman (2014), Capital is back: Wealth-income ratios in rich countries, Quarterly Journal of Economics, 129(3), 1255.

Schreiber, U., D. von Hagen and F. N. Pönnighaus (2018), After the US tax reform 2018: Germany in tax competition, Tax and economy, 99(3), 242.

Federal Statistical Office (2019), Statistical yearbook 2019.

Tax Foundation (2020), State Corporate Income Tax tates and brackets for 2020, https://taxfoundation.org/state-corporate-income-tax-rates-brackets-2020/ (February 14, 2020).

Vlachou, C. and O. Iakovidou (2015), The evolution of studies in business location factors, Journal of Developmental Entrepreneurship, 20(4), 1.

Welling, B. (2018), Need for Structural Tax Reforms, The operation, 71 (3), M4.

World Bank (2020), Ease of Doing Business rankings, https://www.doingbusiness.org/content/dam/doingBusiness/pdf/db2020/Doing-Business-2020_rankings.pdf (June 24, 2020).

Scientific Advisory Board at the Federal Ministry of Finance (2018), US Tax Reform 2018: Tax Policy Consequences for Germany, https://www.bundesfinanzministerium.de/Content/DE/Downloads/Broschueren_Bestellservice/2019-03-15-WB-US-Steuerreform- 2018.pdf? __ blob = publicationFile & v = 6 (February 20, 2020).

Wolff, G. (2018), The Consequences of the US Tax Reform for Europe: Why the Federal Government Must Respond Quickly to Trump's Reform, Manager magazine, 14th of February.

Zeit (2019), Statistics Office: British economy is shrinking for the first time since 2012, https://www.zeit.de/news/2019-08/09/britische-wirtschaft-schrumpft-erstmals-seit-dem-jahr-2012 (14. February 2020).

Zwick, E. and J. Mahon (2017), Tax policy and heterogenous investment behavior, American Economic Review, 107(1), 217.

Title: Tax Policy in the COVID-19 Crisis

Abstract: Current reform proposals call for a reduction of the corporate tax burden in Germany and justify this due to the competitiveness of Germany as a business location. However, in view of Germany’s continuously high attractiveness in this regard, these demands appear to be inappropriate, even in an international context. To ensure this attractiveness in the long term, it seems to be more important to focus on investments in digitization, the digital infrastructure, and electromobility. Even in times of economic problems, e.g., the COVID19 pandemic, lowering the nominal tax burdens on companies is not necessarily the answer. Instead, temporary tax breaks for companies that invest during this phase of economic weakness may be more appropriate.

JEL Classification: H25, H71

© The Author (s) 2020

Open Access: This article is published under the Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/deed.de).

Open Access is funded by the ZBW - Leibniz Information Center for Economics.