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ifo President Fuest calls for corporate tax cuts in Germany

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The ifo President Clemens Fuest has called for a reduction in corporate taxes in Germany. "There is an urgent need for action," he said. "At around 30 percent, the tax rate on retained earnings is significantly higher than in comparable countries. Among the G7 countries, only France currently has a higher rate of 33 percent. However, this rate will soon be cut to 28 percent, and further reductions to 25 percent have already been decided. Other countries have also reduced taxes, above all the USA. "In order to curb tax revenue losses due to profit shifting abroad and to keep investments and jobs in Germany, the German government should follow France's example and gradually reduce the tax burden to 25 percent. Moreover, investment incentives should

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The ifo President Clemens Fuest has called for a reduction in corporate taxes in Germany. "There is an urgent need for action," he said.

"At around 30 percent, the tax rate on retained earnings is significantly higher than in comparable countries. Among the G7 countries, only France currently has a higher rate of 33 percent. However, this rate will soon be cut to 28 percent, and further reductions to 25 percent have already been decided. Other countries have also reduced taxes, above all the USA. "In order to curb tax revenue losses due to profit shifting abroad and to keep investments and jobs in Germany, the German government should follow France's example and gradually reduce the tax burden to 25 percent. Moreover, investment incentives should be improved by accelerating tax depreciation."

Fuest added that falling corporate taxes would increase investment in Germany and thus reduce the much criticized export surplus. Accelerated tax depreciation only shifts tax revenues into the future. Since the German government can currently borrow for zero interest, the fiscal costs of such a measure are zero.

Clemens Fuest
Clemens Fuest took over from Hans Werner Sinn as chairman of the IFO Institute in April 2016. He is professor at the Faculty of Economics of the University of Munich.

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