Lower taxes for foreigners in Germany. Working in Germany. Germany’s finance minister wants to cut income taxes for workers to help with labor shortages. Christian Lindner proposes a tax break for immigrants in their first three years in Germany. The cut would be 30% of a worker’s gross salary in the first year, 20% in the second year, and 10% in the third year. This reduction would only apply to wages within a set range. The policy would be reviewed after five years. However, not everyone supports this plan. Here are the details.
Lower Taxes for Foreigners in Germany: What is the government’s plans
Germany’s shortage of skilled workers, especially in key areas like healthcare and IT, is becoming a major concern for the economy. The situation worsens as many baby boomers retire. Immediate solutions include encouraging more people to work, improving integration and education for immigrants and refugees, and attracting more skilled workers from abroad. The Netherlands and Austria already offer tax breaks to skilled foreign workers to address the same issue.
Germany plans to introduce tax incentives for newly arrived skilled workers. This plan is part of a package of measures in the budget plans for 2025, aiming to stimulate economic growth, according to Bild.de. However, it has not yet been approved.
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The opposition criticizes plan
Politicians from opposition parties have criticized the plan. CDU economic policy spokeswoman Julia Klöckner told Die Welt that the plan amounts to “discrimination against German citizens.” German citizens and previously settled foreign workers, who would still pay full income taxes, might feel similarly. The far-right Alternative for Germany (AfD) and the Left Party (Die Linke) also oppose the proposed tax cut.
Some German unions have joined the critics. Yasmin Fahimi, head of the Confederation of German Trade Unions (DGB), called the proposal “socially explosive.” The Organization for Economic Co-operation and Development (OECD) tracks which countries are most attractive for foreign workers. Among the 38 OECD countries, Germany dropped from 12th place in 2019 to 15th place in 2023. According to the OECD, “income and tax” is the second most important “indicator of the attractiveness of foreigners,” after “quality of opportunities.” Although coalition leaders support this change, the proposals have not yet been finalized and approved. There will likely be many negotiations in the coming weeks.