After a decade of strong export-led growth, decreasing unemployment and fiscal surpluses, the pandemic and the energy crisis have revealed structural vulnerabilities and emphasised the need for accelerating the green and digital transitions. At the same time, rapid population ageing increases public spending pressures and exacerbates skilled labour shortages. Reducing labour taxes, particularly for low-income and second earners, facilitating skilled migration, and improving adult education and training, particularly for low-skilled and older workers, is key to address skilled labour shortages. Education quality needs to improve, with a particular focus on children from disadvantaged households, to better equip younger generations with the skills needed for the green and digital transition. Fostering business dynamism, investment and innovation by lowering market entry barriers, strengthening competition, and improving access to finance for start-ups is crucial to raise productivity growth. This requires, in particular, the modernisation of the public administration to lower the administrative burden and improve the quality of public services. Addressing the existing infrastructure backlog and investment needs for the green and digital transitions will require significant public resources. To tackle these challenges while safeguarding fiscal sustainability, it is crucial to reduce tax expenditures, strengthen tax enforcement, increase public sector spending efficiency and better prioritise spending.
OECD Economic Surveys: Germany 2023
1. Key policy insights
Abstract
The energy crisis emphasises the need for accelerating the green transition and structural reforms
After a decade of strong export-led growth, decreasing unemployment and fiscal surpluses, a strong recovery from the pandemic was under way when Russia’s war of aggression against Ukraine started. A spike in energy prices due to the war has fuelled inflation and reduced the purchasing power of households (Figure 1.1). It also weighs on the competitiveness of firms, particularly energy-intensive ones, and increases uncertainty related to energy security, as Germany is highly dependent on energy imports. The government has acted swiftly to secure energy supply and support households and firms facing record high energy prices, but this comes at a significant fiscal cost, compounded by rising defence spending. Energy prices will likely stay high for longer, deteriorating Germany’s terms of trade and weighing on potential growth.
Figure 1.1. Energy prices remain high
Gas and electricity prices (January 2020 = 100)
1. Producer price index of natural gas when supplied to industry.
2. Producer price index of electricity when delivered to special contract customers.
Source: Federal Statistical Office.
Accelerating the green transition holds great potential to strengthen energy security, encourage the development of new business models and support growth, but this will have costs and require more investment and support for workers that need to change jobs (see Chapter 2). Germany has made great progress in greening its economy, with the share of renewables in total electricity production reaching 41% in 2021, up from 8% in 2000. However, reducing greenhouse gas emissions to net zero in 2045 will require more ambitious mitigation policies.
At the same time, rapid population ageing puts pressure on public pension, health and long-term care spending (Figure 1.2). It exacerbates skilled labour shortages lowering potential growth and the comparative advantage of many manufacturing sectors, in addition to energy security concerns (Bickmann, Grundke and Smith, forthcoming[1]). According to the United Nations, the working age population is projected to shrink by more than 8% by 2030, which is far more than in the average OECD country (Figure 1.2). Labour shortages will not only become a severe bottleneck for increasing investments in green, digital and housing infrastructure, but will also affect public administration. Labour shortages already pose a significant challenge to the provision of high-quality services in education, health and long-term care (KOFA, 2022[2]).
Figure 1.2. Rapid population ageing will exacerbate labour shortages and increase fiscal pressure
Note: The graphs show baseline projections for Germany based on latest policy announcements and following the methodology of (Guillemette and Turner, 2021[3]).
Source: Panel A: United Nations (2022), World Population Prospects: The 2022 Revision, Online Edition. Panel B: OECD Long Term Model.
Although Germany managed the initial stages of the COVID-19 crisis well, consecutive waves of the pandemic have underscored the lack of digitalisation in the public sector as well as significant coordination problems across levels of government (Nationaler Normenkontrollrat, 2021[4]). This is hampering the capacity of the state to deliver high-quality public services and risks to hold back the green transition. Complex and lengthy planning and approval procedures for infrastructure investments are a major bottleneck for the expansion of renewable energy supply and other crucial infrastructure (as discussed in the previous OECD Economic Survey of Germany). Accelerating the digitalisation of the public administration will require further investments in digital infrastructure and the skills of public employees as well as better coordination and harmonisation of administrative procedures across levels of government (BMWK, 2021[5]).
Managing the green and digital transformation and addressing the infrastructure backlog will require significant public resources. The average tax burden including social security contributions stood at 39.5% of GDP in 2021, which is around five percentage points higher than the OECD average, but reaching net-zero would significantly reduce revenue from environmental taxes, which amounted to about 2.6% of GDP in 2022 (OECD, 2022[6]; Baer et al., 2023[7]). Moreover, raising labour supply to address skilled labour shortages will require lowering labour taxes, particularly for low-income and second earners. As statutory tax rates are already high in international comparison, the necessary fiscal space should be created by reducing tax expenditures, strengthening tax enforcement, increasing public sector spending efficiency and better prioritising spending. Subsidies and tax expenditures are high and, in many cases, introduce distortions that counteract the key policy objective of greening the economy (see chapter 2). Simplifying the tax system and closing regressive tax exemptions, for example concerning capital gains and inheritance taxes, and strengthening tax enforcement could raise a significant amount of revenue and reduce inequality. It would also lower administrative burden and level the playing field, contributing to a more efficient allocation of capital and fostering entrepreneurship and innovation. Strengthening impact evaluation of policy programmes and making broader use of spending reviews have the potential to significantly raise public spending efficiency and help to better prioritise spending.
Structural reforms are needed to raise productivity and sustain growth despite a declining workforce and to reduce fiscal pressure from rapid population ageing (Figure 1.3, Table 1.1). Improving work incentives in the tax and transfer system, adult education and training programmes and working conditions is key to raise the labour supply of women, low-skilled workers and the elderly. This should be combined with facilitating skilled labour migration and better preparing younger generations with the skills needed for the green and digital transitions, with a particular focus on children from disadvantaged households. It is also crucial to revive business dynamism, investment and innovation. This requires more public investment in infrastructure and research and development (R&D), but also lowering market entry and growth barriers for young and innovative firms. This entails reducing the administrative burden, strengthening the competition framework, raising transparency on political lobbying from established incumbent firms, and improving access to finance. Creating a more favourable environment for start-ups will contribute to developing and adopting the disruptive technologies necessary for the green transition and maintaining Germany’s export strength in the future (see the previous OECD Economic Survey of Germany).
Against this background, the main messages of the Survey are:
Create fiscal space for the green and digital transitions by reducing tax expenditures, strengthening tax enforcement, increasing public sector spending efficiency and better prioritising spending. Accelerate the modernisation of the public administration to improve public governance.
Continue to address the economic consequences of ageing by implementing a comprehensive policy package to support the labour market integration of women, elderly and low-skilled workers, facilitate skilled labour migration, and expand adult learning opportunities. Raise education quality, particularly for children from disadvantaged households, and improve access to early-childhood education.
Reduce emissions cost-effectively by aligning the emission cap in the national trading system with the targets, phasing out environmentally harmful subsidies and tax expenditures, and expanding support for green R&D, focusing on insurance mechanisms and unmatured technologies. Use carbon tax revenues to support vulnerable households and expand the scope of active labour market and adult learning policies to facilitate structural change and reduce inequalities.
Figure 1.3. Structural reforms are needed to preserve growth and reduce fiscal pressures
Note: The effects of structural reforms are quantified using the methodology of (Guillemette and Turner, 2021[3]). The set of structural reforms comprises: a reduction in labour tax wedges by a quarter of the difference to the OECD average; improving the Product Market regulation Index to the average of top five performers and the quality of public governance by half of the difference to the average of top five performers; reducing the distance between educational outcomes of children from the highest and the lowest decile of the household income distribution and average education outcomes to the ones observed in Canada, which is a top performer; improving access to adult education to lower the share of adults without completed basic education by 50% and raising spending for active labour market policies by 50%; increasing public investment as a share of GDP to the OECD average and R&D expenditure to the average of top five performers; improving access and quality of child care and early child hood education by increasing public spending as a share of GDP to the average of top five performers.
Source: OECD Long Term Model.
Table 1.1. Structural reforms will address the negative consequences of ageing and raise living standards
Average yearly additional growth in GDP per capita during the next 10 years (in percentage points)
Note: Same as for Figure 1.3.
Source: OECD Long Term Model.
Learning from recent crises to lay the foundations for a strong recovery
Before the COVID-19 pandemic hit, the economy had prospered on the basis of a strong export-oriented manufacturing sector and booming construction (Figure 1.4, Panel A). Skilled labour migration from other European countries supported a strong expansion of employment and mitigated labour shortages related to population ageing. The unemployment rate declined from 11% in 2005 to 3% in 2022. The introduction of a national debt brake, which limits the federal structural deficit to -0.35% of GDP and those of the Laender to zero, contributed to strong fiscal consolidation with positive fiscal balances and rapidly decreasing public debt (Panel B).
Figure 1.4. Germany enjoyed strong export-led growth and fiscal surpluses over the past decade
Source: OECD Economic Outlook database.
When the pandemic hit, the government used its ample fiscal space to support households and firms with measures amounting to a total of 5.5% of GDP from 2020 until 2022 (Box 1.1). This was enabled by a suspension of the national debt brake for 2020 and 2021, which was extended to 2022. While grants to firms and the short-term work scheme helped to protect jobs and sustain domestic demand, their design likely hindered the reallocation of production factors to booming sectors and firms, thereby exacerbating existing labour shortages and capacity constraints (Box 1.1). To better target support measures during the next crisis, policy impact evaluation needs to improve, which notably requires abolishing legal constraints to access, merge and analyse administrative micro data. The short-term work scheme would benefit from stronger incentives for training and job-search, which should increase over time.
A strong health system kept COVID-19 related death rates lower than in many other EU countries (OECD, 2022[8]). However, a lack of digitalisation in health administration complicated test-track-and-trace strategies, and an initially limited availability of vaccines made the extension of containment measures necessary, hampering the effect of the strong fiscal support on private consumption (Schularick, 2021[9]). Supply chain bottlenecks related to the swift global recovery from the pandemic particularly hit German manufacturing sectors, which are highly integrated into global value chains, leading to a large export order backlog (Figure 1.5). Intensifying labour shortages, exacerbated by mobility restrictions during the pandemic, also help to explain the weak recovery of industrial production, particularly in construction.
Figure 1.5. A strong post-pandemic recovery was mitigated by supply chain bottlenecks and labour shortages
Source: Federal Statistical Office.
When Russia’s war of aggression against Ukraine began, a strong recovery was under way. Private consumption started to rebound due to large excess savings of households and the easing of pandemic-related containment measures. Manufacturing was set to rebound with the loosening of supply chain bottlenecks later in the year. However, rising inflation and plummeting consumer and investor confidence due to the war have slowed down the recovery (Figure 1.6). Producer prices had strongly increased due to soaring energy costs and persistent supply chain bottlenecks, and the pass-through to consumer prices has broadened inflationary pressures. High inflation has reduced real incomes and excess savings, dampening the rebound of private consumption. Real wages were down by 4.6% in the third quarter of 2022 compared to a year earlier, but have recovered since then due to rising nominal wages (Figure 1.6, Panel C). Business confidence has plunged, particularly related to rising uncertainty about energy security, weighing on investment.
The government took bold actions to support households and firms, reduce uncertainty and secure energy supply, contributing to recent improvements in business and consumer confidence (Figure 1.6). Three relief packages estimated at EUR 95 billion (2.6% of GDP) and an energy support fund of EUR 200 billion (5.5% of GDP) financed by credit allowances were put in place. The relief packages include various measures to support real incomes, comprising both targeted transfers through social assistance and housing allowances, and non-targeted ones such as one-off payments to all employees, pensioners and students as well as a temporary VAT tax reduction for gas and hospitality services. Besides temporary measures and one-off transfers for 2022 and 2023, the three relief packages also include many permanent policy changes, which had been planned by the government in the 2022 and 2023 budgets, such as an inflation adjustment of the income tax schedule, the abolishment of the renewable energy surcharge or a reform of the housing allowance system. These measures can be executed within the current budgets for 2022 and 2023, as high inflation led to upward revisions for tax revenues.
Figure 1.6. Inflation and uncertainty are high and nominal wages have started to pick up
Source: Federal Statistical Office; Eurostat; ifo business surveys; GfK.
The debt-financed energy support fund will finance liquidity support, equity injections and grants for firms as well as a subsidy of electricity and gas bills until December 2023, with an option to prolong it until April 2024 (Box 1.2). The subsidy scheme preserves incentives to save energy and adapt to potentially permanently higher prices, but it is not well targeted at vulnerable households and highly exposed firms. Although the government made the subsidies subject to personal income taxes above a threshold of yearly income of EUR 67,000, which introduces a progressive element, improving energy use data, for example by accelerating the roll-out of smart meters, and allowing linking this with other household data is key to improve the targeting of future support measures. A cash-transfer system is being developed to support vulnerable households during the green transition. While the system could also have helped to better target energy price support, its development has been hampered by IT and data protection issues and a lack of coordination and cooperation across ministries and levels of government. Accelerating the development of the system should be a key priority. Developing short-term monthly indicators on the financial situation and cost structures of firms, such as indicators used for the German Business Panel, could help to better target firm support measures ex-ante (Box 1.1). Early-warning systems to detect firms at risk of insolvency can help to target support during and after a crisis and have been implemented in Denmark and France (Moeller and Mukherjee, 2019[10]; Epaulard and Zapha, 2022[11]; Demmou et al., 2021[12]).
Excluding permanent policy measures that are not related to the energy crisis as well as equity injections, total energy price support is estimated at about 1% of GDP in 2022, 2.4% in 2023, and 0.6% in 2024, although falling retail energy prices resulting from falling wholesale prices, as observed since December 2022, would strongly reduce the fiscal costs (Box 1.2) (OECD, 2022[13]). The electricity price subsidy is to be partly financed by a windfall tax on electricity producers. To stabilise the gas market, the government nationalised the biggest gas importer, which was on the brink of default due to the stop to Russian gas imports and high spot market prices, with an estimated budgetary cost of EUR 40 billion (around 1% of GDP). Allowing for the adjustment of contract prices for its clients to reflect higher purchasing costs could help to reduce fiscal costs and provide additional incentives for gas savings, but could also imply a higher number of gas consumers applying for energy price support (Bundesbank, 2022[14]).
To become independent from gas imports from Russia, the government has required private operators to fill up gas storage tanks while providing guaranteed loans (gas storage levels reached 100% in November 2022 and stood at 66% in April 2023), accelerated the construction of LNG terminals and helped to negotiate trade deals with LNG exporters. Electricity production using gas has been reduced and replaced by reactivated coal power plants, while the three remaining nuclear power plants, which were to shut down on 1 January 2023, continued operating until April 2023. The possibility of further postponing the end of nuclear power use to stabilise energy supply in the short term has been discussed, but was rejected, as the extension for a short duration would be costly in regard of the need to order the necessary nuclear fuel and update security measures.
Box 1.1. Evaluation of Covid-19 support measures
Pandemic related fiscal support was high compared to other EU countries and comprised grants to firms (2.1% of GDP), subsidised credit lines (1.65% of GDP), loan guarantees (0.5% of GDP) and more generous short-term work support (1.3%) (BMWK, 2022[15]). Analysis using data from the German Business Panel shows a positive stabilisation effect of these measures (Bischof et al., 2021[16]). In industries most affected by the pandemic, which also received the highest share in distributed grants (hospitality with 33%, retail with 14% and culture, recreation, and entertainment with 12%), the firm survival probability increased on average by 35 percentage points compared to a counterfactual without support measures.
However, there are signs that the generous support might have also slowed down business dynamism (Barnes et al., 2021[17]). The number of firm exits fell significantly below the OECD average and is still significantly lower than before the pandemic (Figure 1.7). Firm entries have slightly increased, but the gap to other OECD countries has widened significantly. Most firms did not use available credit lines but opted for generous grants that reimbursed a share of fixed costs depending on firm-specific revenue losses. These grants have not only covered the aggregate pandemic shock, but potentially also firm-specific shocks. This could have been prevented by conditioning grants on sector-wide revenue losses and cost structures, for example by using indicators from the German Business Panel, or focusing support on liquidity provision through subsidised loans and loan guarantees or tax deferrals (Bischof et al., 2021[16]; Demmou et al., 2021[12]). Focusing on liquidity support instead of grants might have been a better solution, as the equity ratio of small and medium size firms had strongly increased from 18% in 2002 to 32% in 2019, making corporate over-indebtedness due to increased emergency loans less likely (KFW, 2022[18]).
Moreover, Germany was the only EU country with rising replacement rates over time in the short-term work scheme. This in combination with an extended eligibility period of 24 months has strongly reduced job-search incentives and labour reallocation (Heinemann, 2022[19]; Calligaris et al., forthcoming[20]). Training uptake within the scheme was low as the pandemic-related special clause, which reimbursed 100% of social security contributions for employers, counteracted the training incentives of the main scheme, which consist in reimbursing 50% of social security contribution during training periods. The total fiscal costs of the short-term work scheme amounted to about EUR 42 billion in 2020 and 2021.
Figure 1.7. Business dynamism has markedly slowed down
Enterprise entries and exits (2013 Q4 = 100, 4-quarter moving average)
Source: OECD Timely Indicators of Entrepreneurship database.
Box 1.2. Electricity and gas price support
The gas price subsidy follows a two-step approach. In the first step, households and SMEs received a transfer equal to one twelfth of the estimated annual consumption for 2022 multiplied by the gas price for December 2022. To provide timely relief, the upfront payment for the gas bill was waived in December, while the actual transfer will be settled later. In the second step, the gas bill will be subsidised from January 2023 until December 2023 with an option to be prolonged until April 2024. Households and SMEs will receive a discount equal to the difference between their contract price and the targeted subsidised price level (12 cent/kWh) multiplied by 80% of past average consumption. This lump-sum scheme fully preserves gas savings incentives, as lower consumption reduces the final gas bill without affecting the transfer. For large industrial clients, a gas price subsidy based on 70% of past average consumption is in place since January 2023. The subsidy is capped between 2 and 150 million euros, depending on whether a company is part of an energy-intensive sector, proves to have suffered a sufficiently high rise in energy costs and drop in earnings, accepts restrictions on paid bonuses and dividends, and agrees to keep its employment in Germany at current levels until 2025. Similar to gas, the use of other heating materials is subsidised. The subsidy for electricity prices, in place from January 2023 onwards, is designed similarly and partly financed by a windfall tax on electricity producers. Estimates for the fiscal costs of the gas, heating and electricity price subsidies amount to EUR 54 billion and EUR 43 billion, respectively.
A main advantage of the schemes is that the subsidised price levels for households and SMEs remain about 100% and 33% above pre-crisis levels for gas and electricity, respectively, which preserves incentives to raise energy efficiency and adapt to permanently higher fossil energy prices which will come along with carbon pricing. Moreover, the lump-sum nature of the subsidy preserves saving incentives even below the level of 80% of past average consumption, which is key to bring down energy wholesale prices and reduce the likelihood of gas rationing. As the subsidy is tied to contract prices, this ensures that the subsidy declines if retail energy prices fall as a consequence of decreasing wholesale prices.
High energy prices and uncertainty related to energy security particularly affect energy-intensive industries, which compete with foreign firms in domestic and foreign markets (Figure 1.1, Figure 1.8). Average output in energy-intensive industries has dropped by about 10% in 2022, but has increased since then due to falling energy prices. Not all industries and firms have been equally affected, and total industrial production has been broadly stable since the onset of the war (Figure 1.5). Even in high energy-intensity industries, the import substitution of certain highly energy-intensive products stabilised other production processes. Although output in the chemical industry has declined by 26% in 2022, substituting ammoniac production by imports has allowed to continue other key production processes and helped to mitigate negative spill-overs to other sectors (Bachmann et al., 2022[21]; Mertens and Mueller, 2022[22]). Production in automotive, machinery and equipment and computer, electronic and optical goods industries has significantly increased since the onset of the war, mainly driven by easing supply chain bottlenecks.
Many firms sell high-quality products and have considerable market power to pass-on higher input costs to domestic and international clients (Figure 1.9) (Böhringer, Rutherford and Schneider, 2021[23]; Rangnitz, 2022[24]). Despite increasing relative export prices, export quantities expanded by 3% in 2022, particularly driven by automotive, computer and electronic products, and machinery and equipment, which account for a major share of exports (Figure 1.8, Figure 1.10). Many large firms made record profits up to the third quarter of 2022 (Sommer, 2022[25]). Thus, firm support for rising energy costs should be well-targeted to firms that have difficulties to obtain short-term financing. It should mainly consist of short-term liquidity provision to not impede necessary structural change, for example by providing subsidised loans and credit guarantees or tax deferrals, and maintain energy saving incentives (Box 1.1,Box 1.2) (Heinemann, 2022[19]).
As higher energy costs may persist during the green transition, the best policy to support firms is to improve the business environment and foster innovation to enable quality upgrades of products and services. This should include lowering the administrative burden by accelerating the digitalisation of public administration, streamlining planning and approval procedures for infrastructure investments, simplifying the tax system, strengthening competition enforcement and addressing skilled labour shortages (see below). To ensure affordable and stable energy supply in the medium run, it is key to accelerate the expansion of renewable energy supply, upgrade the grid and storage infrastructure and better integrate European electricity and energy markets (see Chapter 2) (Bundesnetzagentur, 2023[26]; Abrizio et al., 2022[27]). Simulations for this survey using a multi-sector and multi-country computable equilibrium model show that emission abatement and higher carbon prices will negatively affect some energy-intensive and trade-exposed industries in the medium term, such as metal and oil refinery industries (see Chapter 2). However, other industries, such as machinery and equipment and the automotive industry, can more easily substitute away from fossil fuel, replace highly energy-intensive domestic inputs by imports and pass on higher input costs to domestic and foreign consumers. Electricity prices are likely to increase, but a better integration of the European electricity grid and facilitating the expansion of renewable energy supply can significantly mitigate risks.
Figure 1.8. Not all industries suffer equally from high energy prices
Output of energy intensive and other industries (Production index, 2015 = 100)
Source: Federal Statistical Office.
Figure 1.9. Many firms were able to pass on higher inputs costs and raise profits
GDP deflator decomposition by income side, contributions, % points
Source: OECD calculations based on OECD National Accounts database.
Figure 1.10. Manufactured capital goods dominate exports
Exports of goods and services, % of total, 2020
Note:1. Other category includes crude materials and inedible materials, mineral fuels, lubricants and related materials, animal and vegetable oils, fats and waxes, commodities and transactions.
Source: OECD International Trade Statistics.
Russia’s war of aggression against Ukraine and related economic sanctions have affected trade with Russia, which amounted to 2.3% of total trade in 2021. Before the start of the war, Germany was highly dependent on Russian gas, oil and coal, with around one-third of primary energy supply coming from Russia. Since then, energy imports from Russia have strongly declined due to the EU coal and oil embargo, the destruction of gas pipelines, and the rapid diversification of energy suppliers. In February 2023, less than 1% of German energy imports still came from Russia. The value of German exports to Russia has decreased by 45% on average in 2022 compared to 2021, mainly driven by plummeting exports of automotive, machinery and equipment and chemical products, while pharmaceutical exports strongly increased. In 2020, the stock of German foreign direct investment (FDI) in Russia amounted to about EUR 20 billion, 1.5% of the total German FDI stock abroad. Many German companies have closed their subsidiaries and production plants in Russia, but the losses from trade with Russia have not led to major firm failures.
The war has also led to a net inflow of about 1 million refugees from Ukraine by February 2023 (1.3% of the population), many of them women and children. In 2022 and 2023, the federal government supports municipalities and the Laender with EUR 4.25 billion to facilitate the integration of children into schools and to provide housing and social assistance for refugees. The Laender, which are responsible for the education system, offer online courses and Ukrainian teaching material to help pupils to continue Ukrainian school classes. Moreover, several hundred Ukrainian teachers have been temporarily hired by German schools via fast-track procedures. For adult refugees, free access to labour market programmes and language courses and a two-year residence permit was granted. However, less than 22% have found a job so far, partly due to limited transferability of skills and weak German language skills (Panchenko and Poutvaara, 2022[28]). Further facilitating recognition procedures for qualifications through skill validation, particularly in highly regulated sectors with high labour shortages such as education and health, and improving the supply of childcare facilities are key to support labour market integration.
The economy will slowly recover, driven by exports
The economy will slowly recover due to the easing of supply chain bottlenecks, a large export order backlog and a pickup in export demand (Table 1.2, Figure 1.5). Real GDP is projected to grow by 0.3% in 2023 and 1.3% in 2024. Growth will be subdued in 2023 as high inflation reduces real incomes and savings and holds back private consumption (Figure 1.6). Rising interest rates and uncertainty amidst energy price volatility weigh on investment, particularly in housing, but strong government support and lower energy prices will continue to improve investor confidence. Investment will eventually pick up due to high corporate savings and investment needs related to the relocation of supply chains and renewable energy expansion, as well as rising public investment. The unemployment rate will slightly decrease to 2.9% in 2024.
Inflation will remain high in 2023, averaging 6.6%, due to the pass-through of energy and producer prices to consumers and rising wage pressures, but will gradually moderate over the projection period. Due to longer-term contracts expiring in 2023, consumer prices for electricity and gas will continue to rise as providers pass on higher input costs when contracts are renewed (Figure 1.1). Wage growth will rise, helped by the minimum wage increase from 48% to 60% of the median wage in October 2022, continued labour shortages and pressure from unions to preserve the purchasing power of workers. Tighter monetary conditions, fading energy price pressures and fiscal tightening will help to bring down inflation to 3% in 2024. Real wages will grow in 2024 supporting a recovery of private consumption.
Table 1.2. Macroeconomic indicators and projections
Annual percentage change, volume (2015 prices)
1. Contribution to changes in real GDP.
2. Percentage of potential GDP.
3. Harmonised consumer price index excluding food and energy, alcohol and tobacco.
Source: OECD calculations based on the OECD Economic Outlook 112 database.
A major downside risk arises from rising gas prices and potential gas rationing next winter that could imply severe production disruptions, if planned fiscal support measures do not sufficiently preserve price incentives for gas savings, weather conditions are unfavourable, and delays occur in building up the LNG infrastructure. Despite filled up gas storage and the opening of three LNG terminals since December 2022, gas consumption needs to be reduced by around 20% to further reduce the risk of gas shortages next winter. Industry has reduced gas consumption by around 23% in January (compared to the average over 2018-21), including through imports of gas-intensive products and modest output reductions in some energy-intensive industries (Mertens and Mueller, 2022[22]). Energy savings should be further incentivised by a gas auction mechanism for firms to supply their excess gas capacity. Households and small firms reduced gas consumption by 23% due to high prices and relatively warm weather in January compared to the 2018-21 average, indicating that maintaining price incentives is key to incentivise gas savings.
New waves of the pandemic could further depress private consumption or exacerbate supply chain bottlenecks. Geopolitical tensions could lead to further trade disruptions and the need to relocate supply chains. Reshoring and rising protectionism will particularly hurt export sectors. Rising interest rates could cause strong corrections in housing markets, affecting financial markets. On the upside, a quicker end of the war could restore investor and consumer confidence and lower energy prices. The easing of containment measures in China will raise demand for German exports and contribute to the easing of supply chain bottlenecks (Box 1.3).
Table 1.3. Events that could lead to major changes in the outlook
Germany’s high exposure to global value chain risk underlines the need for diversification. For example, the share of semiconductors imported from outside of Europe is much higher than in the United Kingdom and Italy (Haramboure et al., forthcoming[29]). Expanding research and development for high-end technology, such as semiconductors which are key for the green and digital transition, can help to reduce supply-chain risks but should be done in close cooperation with other EU countries to realise economies of scale. Higher demand for resilient supply chains will provide sufficient incentives to scale up production of mature technologies in the European Union. As resilience is a top priority for many trading partners, international coordination is key to prevent a subsidy race, which would distort international investment decisions and have a high fiscal cost.
Box 1.3. The effects of an easing of mobility restrictions in China on German industries
An OECD analysis conducted for this survey estimates the effects of reduced mobility restrictions in China on industrial production through rising export demand and improved input supply (Haramboure et al., forthcoming[29]). The demand shock leads to significant output gains, particular in the ICT, textile and electrical equipment sectors (Figure 1.11). The positive effects through easing supply chain bottlenecks are smaller, but still significant and most pronounced in mining, ICT and transport.
Figure 1.11. Germany benefits from easing mobility restrictions in China
Simulated effect of a decrease in Chinese mobility restrictions by 20 percentage points of the Oxford stringency index
Note: The mobility shock roughly corresponds to the decrease in mobility restrictions observed in China from August to December this year, measures by the Oxford stringency index. The sample is restricted to the 20 most affected industries in Germany.
Source: OECD calculations based on (Haramboure et al., forthcoming[29]).
Tightening monetary conditions and high energy prices increase financial market vulnerabilities
The financial sector has weathered the COVID-19 crisis well owing to generous support measures for firms, low interest rates, and high non-financial corporate savings in previous years, as well as to macroprudential and supervisory measures taken during and before the pandemic. The number of corporate insolvencies declined in 2020 and 2021, and is still much lower than in 2019 (Figure 1.12, Panel A). The ratio of non-performing loans stood at 1.1% in the second quarter of 2022 (Figure 1.12, Panel B). Nonetheless, faster-than-expected rises in interest rates, the expiration of COVID-19 support measures in June 2022 and persistently high energy prices might raise the number of firm insolvencies, particularly of energy-intensive companies. Unlike the pandemic, the war might have longer-term structural impacts on energy markets and supply chains. Concerns over short-term liquidity of energy utilities have prompted the government to implement a EUR 67 billion emergency support scheme in the form of short-term liquidity lines and loan guarantees. However, uptake has been low, as the nationalisation of the two biggest gas importers with a fiscal cost of up to EUR 50 billion has stabilised the sector.
Structurally low bank profitability remains a persistent source of vulnerability, even though it has improved since 2021 due to rising interest rates (Figure 1.12, Panel C) (Altavilla, Canova and Ciccarelli, 2020[30]; IMF, 2022[31]). The recent turmoil in the European and US banking sector could lead to higher risks, increased costs and lower profitability. After narrowing since the pandemic, the fallout from the war has raised spreads for Credit Default Swaps (CDS) on the back of low profitability, and the two largest German commercial banks continue trading at a discount relative to many European peers. The value of some bank assets, such as long-term bonds, could further decline due to the rise in interest rates. Nonetheless, the share of bonds in the balance sheets of banks and the net duration risk, which measures how much banks lose if interest rates rise, are relatively low (ECB, 2022[32]). The capital buffers of German banks remain at comfortable risk-weighted levels due to tighter regulatory measures since the global financial crisis (IMF, 2022[31]; ECB, 2022[32]). Credit growth was in line with GDP growth in recent years and, in contrast to other OECD countries, the debt of non-financial firms remains stable and at moderate levels (Figure 1.12,Panel D).
Figure 1.12. Vulnerabilities related to corporate debt remain contained so far
Source: OECD Timely Indicators of Entrepreneurship database; ECB; IMF Financial Soundness Indicators database; IMF.
Monetary policy tightening and rising mortgage rates might lead to strong corrections in housing prices, raising risks related to household debt. House prices have outpaced rents and household income significantly since 2012 (Figure 1.13, Panel A and B). Housing loans continued to grow at record levels until the second quarter of 2022, but have sharply declined thereafter (IMF, 2022[31]). The Bundesbank estimated that residential property was overvalued by 15% to 40% in 2021 (Bundesbank, 2022[33]). Mortgage borrowing costs have risen by 1.6 percentage points since September 2021, raising the risk of a strong downward correction in housing prices (Battistini, Gareis and Moreno, 2022[34]). As the share of fixed-rate loans is high, rising mortgage rates will mainly affect credit risk through decreasing housing prices and mortgage values (Figure 1.13, Panel C). Moreover, high energy prices and inflation strongly reduce real incomes, raising default risks, particularly for poorer households, although average household debt remains below the OECD average (Figure 1.13, Panel D).
The sensitivity of banks' balance sheets to evolving risks related to housing markets and corporate debt should be closely monitored. Recently tightened macroprudential measures should remain in place. To reduce banks' vulnerability to changes in housing prices, the authorities appropriately raised the counter-cyclical capital buffer to 0.75%, from zero previously, and introduced a sectoral systemic risk buffer of 2% on loans secured by domestic residential real estate to apply from February 2023. Borrower-based measures, such as limits on loan-to-value and debt-to-income ratios on new lending, should be strengthened, which requires more granular data on borrowers’ risk profiles and lending standards of banks as well as credit statistics by region and type of lender. In addition, financial sector resilience can be strengthened by better assessing and disclosing risks from climate change and mitigation policies (Chapter 2).
Figure 1.13. Housing market related risks have increased
Source: OECD Analytical House Price database; Eurostat; ECB; OECD National Accounts database.
High domestic saving could help to support start-ups and innovation
Germany’s large current account surplus reflects the gap between high saving of corporates and households and low domestic investment, leading to substantial capital outflows (Figure 1.14). High capital outflows are strongly related to structural factors that weaken domestic investment demand and business dynamism (see the previous OECD Economic Survey of Germany). These include high administrative burden and other regulatory barriers to market entry and competition, but also skilled labour shortages, weak entrepreneurship skills and a banking sector that has difficulties in providing credit to young and innovative firms with high growth potential (Falck et al., 2022[35]; Klug, Mayer and Schuler, 2021[36]). Moreover, generous tax exemptions for income from selling or renting real estate distort investment decisions and hinder allocation of capital to innovative start-ups (see below). Rising public investment in the green and digital transition has the potential to crowd in more private investment but should be complemented by addressing existing structural barriers.
Figure 1.14. A large share of domestic saving is not invested in Germany
Saving-investment balances by sector and current account, % of GDP
Source: OECD National Accounts database; OECD Economic Outlook database.
Investment in ICT and knowledge-based capital (KBC) is particularly low, and the contribution of ICT capital to growth in Germany is half that of the United States (see the previous OECD Economic Survey of Germany). This is related to an underdeveloped venture capital sector and the risk-aversion and limited expertise on new technologies in many banks. The government established an equity fund for future technologies, which is administered by the public development bank KfW, directly providing funding for the growth phase of start-ups and high-risk innovation and crowding in private capital. However, more should be done to foster the contribution of institutional investors to risk-related finance. Less than 8% of assets of retirement saving plans are invested in equity, as against 27% on average across OECD countries (OECD, 2021[37]). The contribution of institutional investors to VC funds is much smaller in Germany than in Nordic countries. Allowing public and private pension funds, such as company pension funds, and other retirement saving plans to invest a larger share of their assets in VC funds, while introducing loss-prevention guarantees for VC investments, could help to improve innovation finance (OECD, 2022[38]). Facilitating the use of stock-ownership option plans (ESOPs) could ease financing constraints of start-ups, allowing them to substitute wage payments by offering employees company shares.
Table 1.4. Past recommendations and actions taken on support for start-ups and innovation
Addressing skilled labour shortages is key to improve the business environment
Skilled labour shortages have intensified and pose a major business risk to many companies (Figure 1.15) (DIHK, 2022[39]). The average duration of vacancies increased from 61 days in 2009 to 119 in 2021, with shortages particularly severe in the areas of nursing, medical professions, construction, craft occupations as well as information technology (IT) (BA, 2022[40]). Capacity constraints in the construction sector pose a serious challenge to expand renewable energy supply and greening the housing and transport sectors (see Chapter 2). Population ageing will further aggravate these shortages with negative effects on potential growth (Figure 1.2). This also risks to significantly reduce the competitiveness of many manufacturing sectors (Box 1.4).
To address skilled labour shortages, it is crucial to support the labour market integration of women, elderly and low-skilled workers, facilitate skilled labour migration, and expand adult learning opportunities (Table 1.1). A labour tax reform would help to raise labour supply of women and low-skilled workers, while better incentives to work longer combined with better working conditions would help to raise effective retirement ages (see below). Improving adult learning and continued vocational education and training (CVET) opportunities, with a specific focus on low-skilled and older workers, and supporting labour mobility are key to help workers affected by the green and digital transition to adjust to changing skill demands and relocate to booming sectors and occupations (see Chapter 2). Improving educational quality to equip younger generations with the skills needed for the green and digital transition, with a particular focus on children from disadvantaged households, will support potential growth in the medium to long term. This should be combined with policies to strengthen business dynamism and innovation, including the adoption of digital technologies, which has large potential to raise productivity and mitigate labour shortages (see Chapter 2 and the previous OECD Economic Survey of Germany).
Figure 1.15. Skilled labour shortages are mounting
Skilled labour gap (number of vacancies that cannot be filled), thousand
Note: The skilled labour gap is equal to the number of qualified workers missing in a specific occupation to fill all open positions within a region aggregated over all occupations and regions.
Source: KOFA (2022).
Increasing skilled migration is one key policy lever to address skilled labour shortages and would also help to stabilise the pension system (see below). To maintain competitiveness of export-oriented manufacturing sectors, supply of workers with vocational education and training (VET) is particularly important (Box 1.4) (Bickmann, Grundke and Smith, forthcoming[1]). A recent draft bill aims to facilitate obtaining a work permit for migrants with a job offer and job experience by waiving the obligatory recognition of foreign degrees in non-regulated professions under certain conditions. It also aims to promote job seeker visas through a point-based system, where a recognised foreign degree is an advantage but not a pre-condition anymore. This planned point-based system should not be confused with the point-based systems used in Canada, Australia and New Zealand, which are used to select migrants with a long-term capacity to integrate and grant immediate permanent residence without the requirement to find a job within a certain period. Despite these significant reform steps, complex and lengthy administrative procedures necessary to receive a visa and work permit and a lack of digitalisation cause uncertainty and high costs for migrants and potential employers. Accelerating the digitalisation of bureaucratic processes, particularly the visa application, and establishing centralised migration offices in the Laender that coordinate the different necessary administrative processes is key. A recent OECD survey points to large potential demand for high-skilled migrants in the German labour market, particularly engineers and IT experts. Potential migrants value the career and employment opportunities, high quality of life and security in Germany and are willing to learn German if this improves their chances to work in Germany (OECD, 2022[41]). As intra-EU migration will likely slow down due to population ageing, scaling up current advertisement and recruitment measures in non-EU countries, improving support for job-search and promoting German language courses abroad is crucial to make the most of this migration potential. Since Germany is already highly active in the field of international VET cooperation, these initiatives could also help to attract future skilled migrants (Azahaf, 2020[42]).
Box 1.4. Migration can help to maintain the competitiveness of manufacturing
The OECD’s METRO model is a multi-country and multi-sector computable general equilibrium (CGE) model that allows to analyse the consequences of global demographic change and migration on the German economy (Bickmann, Grundke and Smith, forthcoming[1]; Smith, Kowalski and van Tongeren, 2022[43]). The United Nations (UN) World Population Prospects for 2030 are used to simulate the economic effects of various migration scenarios compared to a baseline with working age population data from 2020 and average international migration flows from 2010-2020. The simulations abstract from technological change and automation, which could mitigate negative effects of labour shortages on production potential. However, they allow for the substitution between capital and labour. Capital is mobile across sectors, but the total endowment is fixed. The structural parameters of the model are calibrated using data on international input-output tables from 2014.
In a scenario that uses the UN mid-point estimates for population projections for 2030, population ageing leads to a strongly declining workforce in many countries compared to 2020 (Figure 1.2). This decreases GDP in Germany by 4.5% and leads to large output losses in almost all sectors and strong decreases in exports (Bickmann, Grundke and Smith, forthcoming[1]). Labour-intensive sectors such as textiles, construction and hospitality contract the most, but export-oriented manufacturing sectors are also strongly hit and decrease output and exports, such as electronic equipment, machinery, motor vehicles as well as minerals and metals (Figure 1.16). Raising net-immigration to around 600 000 per year, however, can significantly mitigate the adverse effects of ageing, provided that migrants are well integrated into the labour market (Figure 1.16). To maintain export competitiveness, attracting professionals with vocational skills is crucial. Machinery and equipment, electronics, mineral-metal and automobile industries, which account for over half of total exports (Figure 1.10), depend mostly on VET professionals for their production processes.
Figure 1.16. Labour shortages can be mitigated by higher levels of labour immigration
Changes in sectoral output, in % (compared to the baseline with working age population in 2020)
Note: The low migration scenario is based on the mid-point estimate of the UN World Population Prospects for 2030, which presumes an average yearly net immigration of around 130 000 in Germany. The higher migration scenario adds the average net migration for Germany observed in the past ten years, equal to around 500 000.
Better informing students in lower secondary education about occupations in high demand is also key to reduce skilled labour shortages. A rising number of VET positions remains unfilled, yet about 16% of applicants did not receive a suitable offer in 2021 (Figure 1.17). Vacancy rates are highest for many occupations in the construction and health sectors. To reduce the existing mismatch, it is key to improve the current VET transition system (Übergangsbereich), which supports young adults who have not succeeded in finding a VET position in a firm on their own. So far, several federal and state-level programmes coexist, with a lack of coordination, systematic information and guidance services (Enquete-Kommission Berufliche Bildung, 2021[44]). Furthermore, on-the job training needs to be strengthened in the transition system. An internship programme subsidised by the federal employment agency proved to be successful in matching VET applicants with employers and should be expanded (BIBB, 2022[45]; Enquete-Kommission Berufliche Bildung, 2021[44]). Implementing plans to guarantee every interested lower secondary student a VET position (Ausbildungsgarantie) in combination with personalised counselling services and mobility subsidies would be an important step forward. Moreover, unemployment rates among low-skilled adults without a professional degree are high, even for workers with job experience in sectors with severe labour shortages. This calls for better supporting low-skilled workers to start and complete a VET degree, for example by strengthening the recognition of prior learning and expanding the use of partial-qualifications and adult education opportunities (see Chapter 2). The social security reform (Buergergeld) is welcome, as it abolishes the obligation to prioritise job uptake and facilitates adult education and the completion of VET degrees, including by improving financial assistance.
Figure 1.17. A rising number of VET positions remains unfilled, yet many applicants do not receive a suitable offer
Note: The graph shows the number of vacant VET positions and applicants without a suitable offer at the end of the application cycle in each year (30 September).
Source: Datenreport zum Berfufsbilungsbericht 2022 (BIBB).
Better equipping children with the skills needed for the green and digital transition is another important policy lever to address future labour shortages and support potential growth (Figure 1.1, Table 1.1). Inequality in education outcomes is among the highest across OECD countries and has been exacerbated by school closures during the pandemic (DIPF, 2022[46]; OECD, 2019[47]). This is related to weak access to early-childhood education, particularly for children from disadvantaged backgrounds. Although special federal funds support municipalities to expand infrastructure for early-childhood education, many disadvantaged households have difficulties finding a place (Jessen, Schmitz and Waights, 2020[48]). This is because information and applications are not centralised within municipalities, selection is based on bilateral interviews, and access costs are high in some Laender (Hermes et al., 2021[49]). Raising subsidies for vulnerable households should be combined with centralising application procedures within municipalities and improving guidance. It is also key to address severe labour shortages in childcare and basic education, which risk reducing educational quality, by improving recruitment and training, and raising salaries (Bock-Famulla et al., 2022[50]). Weak targeting of support measures for disadvantaged school children is another important issue, which should be addressed by using more frequent learning evaluations to better target support, as for example successfully done in Hamburg. The federal EUR 2 billion fund to address pandemic-related learning losses is welcome but should be complemented by an evaluation of learning deficits and policy tools across Laender to improve spending efficiency and foster peer learning.
Table 1.5. Past recommendations and actions taken on training, education and labour market policies
Modernising the state to support the green and digital transition
After a decade of fiscal surpluses and strongly decreasing public debt, the fiscal balance turned negative due to pandemic-related fiscal support (Table 1.6). The fiscal deficit is likely to remain high in 2023 due to energy price support, although falling retail energy prices would lead to a lower deficit as support measures are conditional on retail energy price levels (Box 1.2). If the announced volume of energy price support of more than 2.4% of GDP in 2023 materialises, an expansionary fiscal stance would risk further increasing core inflation (Figure 1.6) (Bundesbank, 2023[51]). To contain inflationary pressures, it is key to avoid an expansionary fiscal stance, while standing ready to further support vulnerable households if needed. Possible adjustments could comprise financing a larger part of the energy price support by cutting spending in other areas and raising tax revenue, for example by lowering the threshold above which the energy price subsidy is subject to personal income taxation. If energy price support is smaller than expected due to lower retail energy prices or if tax revenues are higher than expected in 2023, the additional resources should be used to reduce the fiscal deficit.
Table 1.6. The fiscal balance has turned negative during the pandemic
General government, % of GDP
1. Defence; public order and safety; housing and community amenities; recreation, culture and religion; environment protection.
Source: OECD National Accounts database; Economic Outlook database.
In the medium term, it is crucial to address rising fiscal pressures from ageing to maintain fiscal sustainability. This will require structural reforms to address skilled labour shortages and raise productivity (Figure 1.18, Figure 1.3, Table 1.1). Moreover, offsetting ageing-related costs while preserving fiscal space to address high investment needs in times of rising interest rates and adverse economic effects of the war of Russia against Ukraine will also require better prioritising spending, increasing spending efficiency, reducing tax expenditures and strengthening tax enforcement (Table 1.7). Reducing labour taxes, particularly for low-income and second earners, should be financed by reducing tax expenditures and strengthening tax enforcement, while not raising the overall tax burden. As reaching net zero in 2045 will significantly reduce revenue from environmental taxes, which amounted to about 2.6% of GDP in 2022, further adjustments in the tax mix will be necessary, for example by raising property taxes (see below) (Baer et al., 2023[7]). On the spending side, significant fiscal space can be created by better prioritising spending and raising spending efficiency across levels of government, which can be used to finance important investment needs in infrastructure and innovation as well as to improve the quality and access to education and training. Importantly, these investments in physical and human capital will raise potential growth in the medium and long term, reducing their total fiscal costs and creating additional fiscal space by 2045 (Table 1.1, Table 1.7). This will help to mitigate the strongly rising fiscal pressures due to ageing, as pension and health related spending is estimated to increase by about 4.6 percentage points of GDP until 2045 (Figure 1.2, Figure 1.18).
Figure 1.18. Addressing the fiscal effects of ageing is key to safeguard fiscal sustainability
Gross government debt, % of GDP (Maastricht definition)
Note: The scenario “Complying with the EU Fiscal Compact rule” uses the projected growth path from the OECD Long-Term model and assumes that the structural fiscal deficit reaches 0.5% of GDP in 2026 and is constant thereafter. The scenario “not offsetting ageing related costs” builds on the previous scenario, but assumes that ageing related additional costs in pension, health and long-term care systems are not offset and deteriorate the primary fiscal balance by 4.6 percentage points until 2045. The “Structural reform scenario” shows the effect of a comprehensive set of structural reforms on public debt (Table 1.1). The scenario “Higher interest rates” raises interest rates by 1 percentage point during the projection horizon.
Source: OECD Long term model.
Table 1.7. Potential fiscal impact of OECD recommendations
Note: The effects of reforms related to prioritising spending and raising spending efficiency at all levels of government are difficult to quantify using available methodologies, but would significantly contribute to increasing fiscal space. The estimate for the fiscal impact of improved public procurement procedures is derived from an OECD study which has estimated the gains in spending efficiency to be about 1 percentage point of GDP, if risk assessment and analysis of market capacity for infrastructure contracting decisions are improved across all levels of government by applying the OECD Support Tool for Effective Procurement Strategies (STEPS) (Makovšek and Bridge, 2021[52]; OECD, 2021[53]).
Source: OECD calculations based on the OECD Long-Term Model.
Updating the fiscal policy framework
Since the 2000s, weak public investment has led to a large investment backlog in education, transport and digital infrastructure (see the previous OECD Economic Survey of Germany). The net capital stock has strongly declined since 2003, especially in municipalities, which are responsible for school and transport infrastructure. During the pandemic, many schools were not equipped with the necessary digital infrastructure to continue classes online, causing average learning times to drop more than in other European countries (Freundl, Stiegler and Zierow, 2021[54]). School closures had strong negative consequences on skills development, particularly among children from disadvantaged households, adding to existing structural weaknesses in basic education, increasing inequality and lowering future growth potential (see above) (Fuchs-Schuendeln, 2022[55]; DIPF, 2022[46]).
Figure 1.19. Public investment has increased, but remains low
Source: OECD Economic Outlook database; OECD National Accounts database.
To improve the finances of municipalities and address the investment backlog in municipalities, the federal government has set up several special funds (Sondervermoegen) since 2007, for example to expand childcare and early-childhood education facilities or improve digital and green infrastructure (Box 1.5). Spending under these funds is outside of the core budget, and, since the second supplementary budget of 2021 balances of spending outflows and revenue inflows of special funds do not affect the fiscal deficit in the definition of the national debt brake anymore (Bundesbank, 2022[56]). Instead, the fiscal deficit in the definition of the debt brake increases when special funds receive transfers or borrowing allowances from the core budget. The government took advantage of the pandemic-related suspension of the federal debt brake from 2020 to 2022 to transfer EUR 26 billion in 2020, borrowing allowances of about EUR 60 billion, which were not used due to lower-than-expected take-up of COVID-19 support measures in 2021, and EUR 6 billion in 2022 to the climate and transformation fund to support future investments in the green transition. In 2022, the parliament approved specific borrowing allowances of up to EUR 200 billion for the recently established energy support fund and EUR 100 billion for a special fund to improve defence infrastructure. As net spending of these funds does not affect the fiscal deficit in the definition of the national debt brake, significant spending and investment plans of the special funds for the next years can be combined with the reinstatement of the national debt brake from 2023 (Box 1.5). At the same time the structural fiscal deficit according to the Maastricht criteria, which includes net balances of special funds, is projected to stay significantly above 0.5% of GDP (Table 1.2), the threshold applied under EU fiscal rules until the activation of the general escape clause in 2020.
Box 1.5. The fiscal framework and the accounting of special funds
The German debt brake
In the EU Fiscal Compact, ratifying countries, including Germany, have committed to a medium-term structural deficit limit of 0.5% of GDP, while countries with a debt-to-GDP ratio below 60% can target a higher structural deficit of 1% of GDP. Under the German constitutional debt brake, a structural deficit limit of 0.35% of GDP applies to the federal government and balanced budget rules to the Laender, independently of debt levels. Any deviation from the 0.35% federal target is posted to a control account, with consolidation measures implemented during upswings if the control account exceeds a negative balance of 1% of GDP. Structural borrowing in excess of 0.35% of GDP is only allowed under an emergency situation, which is outside the control of government, has a major negative fiscal impact and has been declared by the parliament, and must be accompanied by an amortisation schedule. The exemption clause of the debt brake was invoked in 2020, 2021 and 2022. The Laender parliaments can independently decide on whether an emergency situation justifies the exemption clause for the debt brake at the Laender level. Surpluses from earlier years allocated to reserves, such as the refugee reserve, can be used to temporarily fund additional spending. This provides additional flexibility and can help meet the debt brake target by allowing surpluses to be shifted from one year to another, which can be significant given the size of reserves that amounted to EUR 48 billion (1.3% of GDP) in 2022. In contrast, the control account, which had a balance of EUR 48 billion (1.3% of GDP) in 2022, cannot be used to fund structural deficits in excess of 0.35% of GDP.
An important part of the constitutional debt brake is the computation of the output gap and the cyclical component, which allows to adjust the maximum threshold for actual net borrowing according to the business cycle in a symmetric way. The cyclical component increases the possibility of net borrowing in downturns and lowers it in upswings. The government is currently evaluating to which degree the output gap and the cyclical component are vulnerable to major revisions of GDP and tax revenues, and whether this has led to pro-cyclical adjustments of fiscal policy in the past (Ochsner and Zuberer, 2022[57]; Bundesbank, 2022[58]).
The accounting of special funds
Two types of special funds exist, which are separated from the core budget and are treated differently by the national debt brake. For all special funds, net spending and net borrowing are recorded in the fiscal deficit and the debt statistics according to the Maastricht criteria.
First, special funds with their own borrowing authorisations, such as the defence fund, the economic stabilisation fund (used to finance the energy price support fund), the financial market stabilisation fund and the investment fund (ITF), coordinate their annual borrowing in the form of government bonds with the Ministry of Finance or the Finance Agency of the federal government. In principle, the managers of each special fund decide on the required annual amount of borrowing, subject to the maximum amount of borrowing allowances, the specific purpose and the time period defined by the law establishing the fund. Usually, there is no restriction concerning the budget year in which the borrowing takes place, although for financing the energy price support, the economic stabilisation fund was given a net borrowing authorization of EUR 200 billion valid only for 2022. Only the economic stabilisation fund is covered by the national debt brake. Its net borrowing adds to the fiscal deficit, while net spending does not. The defence fund has been completely excluded from the national debt brake by a two thirds majority in both chambers of the parliament in 2022. For both funds, a repayment plan is necessary that specifies when the core budget will start to repay the issued debt. In contrast, the financial market stabilisation and the investment fund are outside of the national debt brake and do not need any amortisation plans, because they have been established before the national debt brake and benefit from a grandfathering rule.
The second type of special funds are funds without their own borrowing allowances, such as the climate and transformation fund, the digital infrastructure fund, the fund to support municipal investments, the childcare infrastructure fund for primary school children and the special funds to finance infrastructure rebuilding after the floods of 2013 and 2021. These funds are financed by direct transfers from the core budget or by specific earmarked revenues, such as revenues from carbon pricing which are allocated to the climate and transformation fund. Before 2022, any transfer from the core budget to these funds was neutral to the fiscal deficit in the definition of the debt brake, while the yearly balance of spending and revenues of these funds added to the fiscal deficit in the definition of the debt brake. With the second supplementary federal budget of 2021, however, the accounting method was changed. Since then, transfers from the core budget to these funds are recorded in the fiscal deficit in the definition of the debt brake, while net spending of these funds does not add to the fiscal deficit of the debt brake anymore. The new rules apply ex-post to all budget operations concerning special funds without their own borrowing allowances since 2016, which required to re-compute fiscal deficits and the control account for all years since 2016 (Bundesbank, 2022[56]). This change in accounting rules allowed to take advantage of the pandemic-related exemption clause of the debt brake to transfer borrowing allowances of EUR 60 billion, which had not been used due to low up-take of support measures during the pandemic, to the climate and transformation fund in 2021. These borrowing allowances can be used in subsequent years to finance important investment spending needs by issuing federal government bonds without affecting the fiscal deficit in the definition of the debt brake. However, as the repayment for pandemic-related borrowing allowances is set to start in 2028 (stretched over a 30-year period), this operation will only temporarily increase fiscal space, while reducing fiscal space from 2028.
The strong increase in the number and size of extra-budgetary funds reflects structural problems in the fiscal framework (IMF, 2022[31]). Including the recently established energy support and defence fund, the total size of existing special funds is about EUR 400 billion (or 10% of GDP) (Bundesbank, 2022[14]). Although emergency situations such as the pandemic justify the suspension of fiscal rules to enable strong fiscal support, it is less obvious why structural investment spending in key policy areas such as defence, digital and green infrastructure or education should be separated from the core budget and not accounted for by the fiscal deficit under the national debt brake. This decreases the transparency of fiscal accounts and risks to reduce the credibility of the fiscal framework. Some Laender have already started to use the debt brake exemption clause to create their own extra-budgetary funds in 2023, making it increasingly difficult to compare the financial situation of sub-national governments based on fiscal accounts and risking fiscal slippage (Bundesbank, 2022[59]). For example, Saarland has created an extra-budgetary fund of about 9% of its GDP by suspending the debt brake to finance the fund with additional debt, arguing that challenges related to the green transformation constitute an emergency situation (von Weizsaecker, 2022[60]).
To improve transparency and strengthen the credibility of the debt brake, the government should gradually re-include spending under the extra-budgetary funds into the core budget while introducing more flexibility in the fiscal rules to allow for adequate investment spending. Including structural spending in the core budget would help to facilitate the necessary political discussions on how to finance important investment needs, which spending to prioritise and how to raise additional revenue. This is particularly important as fiscal pressure from social security and health systems will strongly increase over the coming years and repayment for the debt issued during the pandemic will start from 2028 (Figure 1.2). For example, aligning national with EU fiscal rules would provide some additional fiscal space, as this would raise the upper limit of the structural deficit to 0.5% of GDP and allow for a deficit of 1% as long as public debt is lower than 60% of GDP, as discussed in the previous Economic Survey of Germany (Bundesbank, 2022[61]). Complying with a structural deficit of 0.5% of GDP from 2026 onwards would lower public debt to 60% of GDP by 2030 (Figure 1.18). However, changing the debt brake rule will demand building a broad political consensus, as it requires changing the constitution with a two-thirds majority in both chambers of the parliament. Until a consensus is reached, any published reports and data about the core budget at the federal and the Laender level should automatically include transparent information on spending from extra-budgetary funds. This should be combined with a transparent quantification of contingent liabilities associated with quasi-fiscal activities of state-owned banks (such as the development KfW), the public rail company and other state-owned enterprises, which are currently not accounted for in public debt statistics according to EU rules (IMF, 2022[31]; Asatryan, Heinemann and Nover, 2022[62]). Issues related to financial difficulties of many municipalities would be better addressed through a comprehensive tax reform and spending efficiency improvements by modernising public administration and enhancing cooperation across municipalities (see below).
Reforming the tax and transfer system
Labour taxes are among the highest across OECD countries, reducing incentives for labour supply (Figure 1.20). This is mainly driven by social security contributions, which are earmarked to fund pension, health and long-term-care spending. With rapid population ageing, it is crucial to reform the tax system and shift the tax burden from labour towards other taxes, such as capital income, property, inheritance and consumption taxes (Figure 1.21). This would help to raise labour supply incentives and mitigate the ageing related decline of the working age population and potential growth (Figure 1.3).
Figure 1.20. Labour taxes are high
Average tax wedge decomposition, % labour costs, 2021
Source: OECD Taxing Wages database.
Figure 1.21. The tax mix is skewed towards labour taxes
General government tax revenues, % of total, 2019
Source: OECD Tax Revenue Statistics database.
Improving incentives to raise labour supply
Incentives in the tax and transfer system to expand working hours are weak for low-wage earners and their employers. The share of workers in the lowest quintile of the salary distribution, who would like to work at least four hours more than they currently do, strongly increased from 8% in 1993 to 23% in 2018 (Beckmannshagen and Schröder, 2022[63]). Despite recent reforms to smooth the labour tax schedule for low-income earners, effective marginal tax rates were still close to 100% or above in early 2022 (Figure 1.22). This is due to the design and withdrawal of different transfers, for example family benefits for households with children, which causes net incomes to remain constant or even decrease with an increase in gross income (Bloemer et al., 2021[64]; SVR, 2019[65]). The recently adopted reform of social assistance will decrease withdrawal rates of subsistence benefits, which should lower effective marginal tax rates for earners without children, but more should be done to lower effective marginal tax rates for households with children. The planned reforms of housing benefits and child allowances should be carefully designed and coordinated with regulations for other social transfers so that higher benefit levels do not translate into higher effective marginal tax rates when benefits are withdrawn.
Due to the current joint income taxation rules for couples and the exemption of Mini-job income (below a monthly income of EUR 520) from income tax and social security contributions, marginal effective tax rates are particularly steep for second-earners (Figure 1.23) (OECD, 2022[66]; Bloemer and Consiglio, 2022[67]). This is one important reason why 48% of women work part-time in jobs for which they are over-qualified. To motivate women to expand their labour supply and thus address rising skilled labour shortages, it is crucial to reform the current joint taxation rules by introducing a separate tax-free allowance for couples. This could have sizable effects on labour supply and at the same time raise additional tax revenue of EUR 10 billion per year (Bach et al., 2020[68]). These additional revenues would come from increased female labour supply as well as raising revenue collection from richer single-earner couples, who are benefitting from the current legislation. Additional revenues from the reform could be used to further improve access to high- quality childcare and early-childhood education, which would not only raise educational outcomes of the future workforce, but also help to expand female labour supply (see the previous OECD Economic Survey of Germany).
Figure 1.22. Labour supply incentives are weak for low-income earners
Effective marginal tax rate (in %) per gross income measured in % of average earnings, 2022
Note: The vertical axis shows the effective marginal tax rate in % for a 10 percentage point increase in earnings at various gross employment income levels (measured in % of average income on the horizontal axis). Scenarios with children are based on two children at the ages of 4 and 6. Annual housing costs are assumed to be 20% of average wage. Median and percentile values for OECD are based on OECD countries except Germany. Results are based on rules as of 1 January 2022 for Germany, and as of 1 January 2019 for the OECD average.
Source: OECD calculations from OECD Tax-benefit model, http://oe.cd/taxBEN.
The reform of the joint income taxation rules should be combined with a reform of the Mini-Job regulation. Subsidising employment by exempting Mini-Jobs from income taxes and employees’ social security contributions has been successful in stimulating employment for low-skilled workers, but in combination with other features of the tax and transfer system, such as the joint income taxation of couples, it has locked in many workers in part-time jobs with low levels of social protection, training access and career prospects (Bruckmeier et al., 2022[69]). More than 7 million workers or about one sixth of the work force are currently working in Mini-Jobs, 4 million of which have no other regular job, while more than 65% are women (Bundesagentur fuer Arbeit, 2022[70]). Mini-Jobs are most prevalent in hospitality, retail and domestic services. Although a recent reform has introduced smoothly increasing social security contributions for employees above the Mini-job income threshold, thereby improving labour supply incentives, second-earners with a Mini-Job still face steeply increasing effective marginal tax rates due to joint income taxation rules for couples, which reduces their net income when expanding labour supply (Bloemer and Consiglio, 2022[67]). To partly finance the decrease of contributions for employees above the threshold, employer contributions above the threshold were increased, which creates incentives for firms to shift employment from regular jobs to Mini-jobs (Bruckmeier et al., 2022[69]). Below the Mini-job threshold employers pay a rate of about 31%, which due to the reform decreases smoothly to the standard rate of 26%, instead of a rapid drop. The income threshold until which social security contribution rates progressively increase for employees was raised from EUR 1 600 to EUR 2000 (Midi-jobs), raising labour supply incentives and real incomes for low-wage earners, but incentivising workers with incomes above this threshold to reduce working hours (Bloemer and Consiglio, 2022[67]).
To improve the attractiveness of regular jobs, the income threshold at which social security contributions progressively increase (Midi-jobs) should be lowered towards zero, which would decrease the scope for Mini-jobs (Walwei, 2021[71]; Bruckmeier et al., 2022[69]). Many countries such as Israel have introduced progressive social security contribution rates for low-wage earners and their employers, which had positive effects on labour supply and job creation (OECD, 2022[66]; Eckstein, Lifshitz and Larom, 2018[72]). Arguments against restricting the use of Mini-jobs include lower administrative burden and firing costs, which provides more flexibility to firms in sectors with high demand fluctuations (Sperrmann, 2022[73]). However, the market for temporary work agencies is well-developed in Germany, providing firms with a flexible pool of about 1 million workers (Spermann, 2013[74]). In addition, firms also have the option to hire workers on temporary contracts which can be extended up to two years (Feld, Iglesias and Weigert, 2015[75]). Although Mini-jobs might help to reduce informality in sectors such as hospitality, recent studies indicate that since the introduction of Mini-jobs in the early 2000s informality has not decreased on average and remained at about 16-17% of GDP (Elgin et al., 2021[76]; Kelmanson et al., 2019[77]). The better policy lever to fight informal work is to improve enforcement capacities and introduce an obligation to document working hours of employees. Particularly in times of high labour shortages, it seems unlikely that reducing the scope for Mini-jobs would lead to a strong drop in employment. The resources freed by reducing this expensive and untargeted employment subsidy would be better used to improve training and adult education opportunities for low-skilled workers or expand targeted employment subsidies for long-term unemployed (see above and chapter 2).
Figure 1.23. Labour taxes are particularly high for second earners
Difference in the average tax wedge between two- and one-earner family, % points, 2021
Note: The tax wedge is the sum of personal income tax, employee plus employer social security contributions, minus social benefits as a percentage of labour costs. The chart shows the difference in the average tax wedge for a married couple with two children between a two-earner and a one-earner family. In the first case, the family has two salaries: the primary earner earns the average wage, and the secondary earner earns 67% of the average wage. In the second case, there is only one breadwinner that earns the average wage. A positive difference indicates that the marginal tax on the second earner is high.
Source: OECD Revenue Statistics database.
High inflation increases real effective personal income tax rates, as thresholds in the progressive income tax schedule are not indexed to inflation. This leads to particularly detrimental effects of inflation on labour supply decisions and real incomes of low- and middle-income households (Bach, 2021[78]; Immervoll, 2005[79]). Although the government periodically adjusts the tax schedule and tax allowances, adjustments have not been sufficient to fully account for inflation (Dziadkowski, 2022[80]). Linking tax-free allowances and the tax schedule directly to inflation would prevent further automatic increases in real effective tax rates and a deterioration of labour supply incentives for low- and middle-income households. This should be combined with a reform of the tax schedule that improves labour supply incentives by raising tax-free allowances and applying a linear progressive tax schedule smoothing kinks (Bach, 2021[78]). It is key to complement this with a reform of the joint taxation rules for couples (see above), as raising tax-free allowances without such a reform will further reduce labour supply incentives of second earners (Bloemer and Consiglio, 2022[67]). The total fiscal cost of a comprehensive reform of labour taxation depends on the exact design of reforms but will likely need to be financed by raising revenue from other taxes (Bloemer et al., 2021[64]).
Reducing tax expenditures and closing loopholes to level the playing field and raise revenue
To finance a comprehensive labour tax reform and raise additional revenue to address investment needs, effective tax rates on capital income, property, inheritance, and consumption taxes should be increased by reducing generous tax expenditures (Figure 1.21). This should be complemented by improving tax enforcement (see below). Another option to finance the decrease in labour taxes is to extend the tax base for social security contributions to capital or corporate income, as in France or as is currently the case with the Solidaritaetszuschlag to finance infrastructure investments in East-Germany. Rising revenue from carbon and other environmentally-related taxes could be used to finance infrastructure investments, but not the decrease in labour taxes, as these revenues are likely to fall rapidly when firms and households adapt their behaviour and reduce emissions (Black et al., 2021[81]).
Abolishing regressive and distortive tax expenditures and loopholes for real estate investments across different tax types would raise up to EUR 12 billion per year, contribute to reduce inequality and improve the allocation of capital to its most productive use (Fuest, Hey and Spengel, 2021[82]; Bach and Eichfelder, 2021[83]). Capital gains from selling real estate are fully exempted from personal income tax, if the property has been held for more than 10 years, leading to revenue losses of around EUR 6 billion per year. Moreover, taxable rental income is reduced by overly generous tax depreciation allowances that strongly reduce tax burden on immovable property (Bach and Eichfelder, 2021[83]). Profits of real estate companies are fully exempted from the Gewerbesteuer, which is a municipal-level corporate income tax with an average rate of 15%, entailing a revenue loss of around EUR 5 billion. Loopholes also allow real estate holdings to avoid paying the tax on land acquisition (Bach and Eichfelder, 2021[83]). Finally, real estate property above 299 apartments is automatically classified as a business asset and exempted from the inheritance tax, which is not the case for smaller properties, leading to revenue losses of about EUR 1 billion (see below) (Bach and Eichfelder, 2021[83]). In combination with low interest rates, the generous tax treatment of real estate has attracted many institutional and wealthy private investors to the German real estate market, leading to misallocation of capital. As this beneficial treatment was not only granted for new constructions, but also for investments into the existing housing stock, they contributed to strongly rising property prices (Figure 1.13). This has also exacerbated the concentration of real estate assets in the hands of the highest income-decile and crowded-out many middle-class households searching for owner-occupied property (Fuest, Hey and Spengel, 2021[82]).
Although taxes on wealth and its transfer, such as inheritance and gift taxes, likely create less distortions than labour or capital income taxes and contribute to raise the equality of opportunities, Germany makes little use of them (OECD, 2021[84]; Scheuer and Slemrod, 2021[85]; Guvenen et al., 2019[86]; OECD, 2022[87]). Moreover, wealth inequality is high compared to other OECD countries, mainly because of the high concentration of home and business ownership (Figure 1.24) (OECD, 2021[84]; Schularick, Bartels and Albers, 2022[88]). A wealth tax was abolished in 1997 following a supreme court ruling that outdated valuations of buildings led to a beneficial tax treatment of real estate compared to other assets. A re-evaluation of buildings is currently undertaken in the context of the ongoing property tax reform. Introducing a wealth tax rate of 1% above a personal tax-free allowance of EUR 2 million would generate around EUR 24 billion per year (Bach, 2021[78]). However, administrative costs of a wealth tax can be high, which is why inheritance and gift taxes are more frequently used across countries (OECD, 2021[84]).
Figure 1.24. Wealth inequality is high
Share of total net household wealth held by the top 10% of the wealth distribution, 2019 or latest available year
Note: Data were not available for Korea and a breakdown of wealth held by the top 10% was not available for New Zealand. The data on net private household wealth does not include occupational pensions, which are an important component of the wealth portfolio of households in some countries, for example in the Netherlands and Denmark (Balestra and Tonkin, 2018[89]).
Source: OECD Wealth Distribution Database, oe.cd/wealth.
To strengthen inheritance taxation, the government should raise the effective tax rate on inheritances and gifts by reducing tax exemptions and closing loopholes (Box 1.6) (OECD, 2021[84]). According to tax data, about EUR 118 billion have been donated or inherited in 2021, while only EUR 11 billion were collected in inheritance and gift taxes, implying an effective tax rate of around 9% (Destatis, 2022[90]). The effective tax rate, however, is estimated to be much lower, as tax data does not include gifts to family members below thresholds for tax-free allowances, which are among the most generous across OECD countries (OECD, 2021[84]). Every ten years, each child can receive tax free gifts of up to EUR 400,000 from each of its parents, and in addition EUR 200,000 from each grandparent. Recent studies estimate that from 2017 until 2027 around EUR 400 billion of assets are transferred to family members and other persons per year, which resulted in an effective tax rate of below 3% in 2021 (Grabka and Tiefensee, 2017[91]; Jirmann, 2022[92]). Improving data collection on wealth transfers, reducing tax allowances for gifts to family members to average levels in OECD countries and accounting for tax exempted gifts when applying tax allowances for inheritance could significantly contribute to raising tax revenue and improving equality of opportunities. Planned updates in the valuation of real estate assets from 2023 onwards are welcome and will raise inheritance tax revenue but need to be complemented by reducing tax exemptions.
Generous inheritance and gift tax exemptions for business assets including shares result in tax expenditures of up to EUR 10 billion per year, which are highly regressive (Jirmann, 2022[92]; BMF, 2021[93]). The 2016 inheritance and gift tax reform has introduced a progressive taxation of business assets above a value of EUR 26 million, but it is still legally possible to receive a full exemption for large business assets in the case of illiquidity of the recipient (Verschonungsbedarfspruefung). The objective of these exemptions is to prevent the forced split-up of large family-owned firms due to liquidity issues and ensure the successful continuation of family management of firms providing well-paid jobs (Box 1.6). However, an empirical evaluation of the 2009 German inheritance tax reform, which had strongly expanded tax exemptions for family business successions, concluded that the less generous system before 2009 had not jeopardised business succession of family firms due to liquidity issues (Houben and Maiterth, 2011[94]). Moreover, these tax exemptions facilitate tax avoidance schemes that allow to declare private wealth as business assets and lead to very low effective inheritance and gift tax rates for wealthy households, one example being the possible declaration of real estate above a threshold of more than 300 apartments as tax exempted business assets (Trautvetter and Schwarz, 2021[95]). Limiting tax exemptions to business assets below a value of EUR 26 million as foreseen in the 2016 reform, and lowering personal tax allowances could be combined with decreases in tax rates and would still significantly raise revenue (Grabka and Tiefensee, 2017[91]; Bach, 2021[78]). To address concerns about forced liquidation of family-owned firms, instalments for tax payments could be further extended (Box 1.6).
Box 1.6. Inheritance taxation across OECD countries
Many OECD countries make use of taxes on wealth transfers, such as inheritance, estate or gift taxes, but effective tax rates vary strongly across countries. Korea, Japan, France and Belgium collect about 0.7% of GDP in inheritance, estate and gift tax revenue, whereas other countries such as Austria or Sweden have completely abolished taxation of wealth transfers. Germany has collected around EUR 11 billion or about 0.3% of GDP in 2021. Low effective tax rates are mainly due to generous personal tax allowances and exemptions for certain asset classes such as business assets. Wealth transfers are expected to rise strongly during the next decades due to ageing of the baby-boom generation, which has accumulated significant wealth during their working life. This is an opportunity to re-design inheritance and gift taxes to improve the equality of opportunities and raise tax revenue needed to finance the green and digital transition.
Figure 1.25. The use of inheritance and gift taxes varies across countries
Inheritance, estate, and gift tax revenues (in % of total tax revenues), 2021 (or latest year available)
Source: OECD Revenue Statistics.
Recipient-based inheritance taxes have many advantages compared to net wealth taxes. Distortive effects of inheritance taxes on savings behaviour and work efforts of wealthy taxpayers are found to be relatively small, while the effects on labour supply of the heirs are significantly positive. When combined with an exemption for low-value inheritances, recipient-based inheritance taxes can significantly lower wealth inequality and contribute to the equality of opportunities. The administration of inheritance taxes is less costly than other forms of wealth taxation, and recent advances in international tax transparency and data exchange greatly facilitate the ability of countries to tax wealth transfers, although more needs to be done to improve beneficial ownership registers, particularly concerning the real estate sector (Bomare and Le Guern Herry, 2022[96]). There is evidence of tax planning and migration among the very wealthy in response to inheritance taxation, but these behaviours could largely be addressed through better tax design. To address migration reactions of very wealthy taxpayers, some countries apply exit taxes or subject emigrants to inheritance tax obligations for many years after they have left the country.
The main argument used against inheritance taxation in Germany is that it might lead to unwarranted liquidation of family-owned firms, in case the heirs face liquidity constraints, and thus cause job losses. However, this concern might be overstated as experiences from Germany and other countries that apply inheritance taxes on business assets show (Bennedsen and Nielsen, 2016[97]; Houben and Maiterth, 2011[94]). Demark, for example, levies a 15% inheritance tax on business assets (and all other asset classes) and allows heirs of business assets up to 30 years to pay instalments. Empirical studies for other countries show that if firm-ownership is passed on within the family, profit rates and managerial quality tend to deteriorate compared to other firms (Bennedsen et al., 2007[98]; Bloom and Van Reenen, 2010[99]). Thus, inheritance taxation can improve resource allocation as it prevents locking in capital in poorly performing firms. However, for small firms that generally face more severe liquidity constraints than larger firms, reduced tax rates or higher allowances could be warranted.
The relatively low public acceptance of inheritance and gift taxes is another argument against their use. However, recent studies have shown that inheritance and gift tax schedules and wealth inequality statistics are often not well known and that better information can significantly increase public support for taxes on wealth transfers (Kuziemko et al., 2015[100]; Stantcheva, 2021[101]; Bastani and Waldenström, 2021[102]). Reducing tax exemptions and loopholes benefitting wealthy households in combination with lowering tax rates for the average household would increase public support. Allowing tax payments in instalments and deferrals under certain conditions for asset-rich but income poor households and clearly communicating these options is also important. In terms of communication, framing reforms aiming to raise more revenue from inheritance taxation as instruments for equality of opportunity and inequality reduction, and combining such reforms with a more comprehensive tax reform, including for example decreases in labour tax rates, may help increase their public acceptability.
Source: (OECD, 2021[84]).
Revenue from taxes on immovable property such as land or buildings are low compared to other countries and have stagnated as a share of GDP since the 1990s, although land prices have more than doubled and real estate prices have increased by about 80% during the last 10 years (Figure 1.26) (Fuest, Hey and Spengel, 2021[82]; Bach and Eichfelder, 2021[83]). This is particularly problematic, as within the federal framework these taxes constitute the second major autonomous revenue source for municipalities besides the Gewerbesteuer, whose revenues fluctuate with the business cycle. High fluctuations of revenues of municipalities complicate long-term planning of infrastructure projects, which is one main reason for the large infrastructure backlog in Germany, as municipalities are responsible for a large share of public infrastructure, such as education and road infrastructure (see the previous OECD Economic Survey of Germany). As taxes on immovable property provide relatively stable revenue streams, increasing effective tax rates would help to reduce the large fluctuations in municipal tax revenue (OECD, 2021[103]). The ongoing reform of the land tax (Grundsteuer) is an important step into the right direction, as it introduces a regular update of land and property values, whereas so far valuations from the 1960s (and 1930s) were used to determine the property tax base in West- (and East-) Germany (Bach and Eichfelder, 2021[83]). Linking land and property taxation more directly to updated property values and establishing a minimum tax rate could help to reduce inequality and raise revenues for many municipalities (Bach and Eichfelder, 2021[83]; OECD, 2021[104]).
Figure 1.26. Revenue from property tax is low
Recurrent taxes on immovable property, % of GDP, 2021 or latest available year
Note 1. Unweighted average.
Source: OECD Revenue Statistics.
Raising the minimum rate of the Gewerbesteuer could also help to improve the financial situation of many municipalities. Detrimental tax competition between municipalities has led to a “race to the bottom” in the past, with tax rates close to 0% to attract firms, which has led the federal government to introduce a minimum tax rate of 7% in 2004 (Dinauer, Kammerer and Ott, 2022[105]). However, due to their weak financial situation many poorer municipalities need to set higher rates, which can lead to shifting of economic activity and profits between regions (Beznoska and Hentze, 2019[106]; Trautvetter and Schwarz, 2021[95]; OECD, 2021[103]). Increasing the minimum statutory tax rate for municipalities to 10% would improve capital allocation across regions and reduce the scope for profit shifting, while leading to a combined minimum tax rate of 25% (the federal corporate income tax rate is 15%), which would be slightly above the OECD average of 23.3% in 2021 (OECD, 2022[87]; Trautvetter and Schwarz, 2021[95]). Abolishing the Gewerbesteuer and compensating this by increasing the share municipalities receive from VAT tax revenues and raising the federal corporate income tax rate is another option that would help to structurally improve municipal finances (Beznoska and Hentze, 2019[106]; OECD, 2021[103]).
Abolishing generous VAT exemptions for real estate, financial and insurance services, education services, and gold, silver, precious stones and art pieces has large revenue raising potential (Trautvetter, 2020[107]). Many of these exemptions are regressive. Reducing VAT exemptions and establishing transparent criteria for remaining ones would raise tax revenue and improve tax fairness (OECD, 2022[87]).
Table 1.8. Past recommendations and actions taken on fiscal and tax policy
Strengthening tax enforcement
Strengthening tax enforcement and reducing tax evasion is not only key for raising revenue and reducing inequalities, but also for levelling the playing field between firms and raising productivity. Multi-national firms make larger use of tax-avoidance schemes to lower their effective tax rates compared to domestic firms, as they can exploit loopholes due to differences between complex national tax systems and can afford the high fixed costs of specialised tax optimisation services (Sarin and Summers, 2019[108]; Tørsløv, Wier and Zucman, 2022[109]). Similarly, richer households are more likely to reduce their effective tax rates by under-declaring income and wealth and evading taxes (Alstadsæter, Johannesen and Zucman, 2019[110]; Guyton et al., 2021[111]). Simplifying national tax systems and improving international cooperation to foster information exchange are crucial steps to reduce the scope for tax avoidance and tax evasion (OECD, 2022[112]). Strengthening the capacities of national tax administrations, by investing in better IT equipment, data infrastructure and human capital, and stricter reporting requirements also hold large potential to raise tax revenue (Sarin and Summers, 2019[108]).
To better target tax enforcement efforts, it is crucial to know more about the extent of tax evasion by tax type (IMF, 2021[113]; Murphy, 2019[114]). In the United States, the Internal Revenue Service regularly publishes tax gap estimates by tax type, which amount to a total tax gap due to non-compliance of about 15% of tax revenues (Sarin and Summers, 2019[108]). In Germany, however, domestic information on tax gaps is not available, mainly due to data protection and IT issues, which are exacerbated by the decentralised tax administration system and strict tax secrecy rules (BMF, 2020[115]). The government plans to establish a tax research network bringing together the tax administration, the Federal Statistics Institutes and the research community to facilitate collecting information on tax gaps and analysing the effects of planned tax reforms. However, this will only be successful if issues related to data protection and tax secrecy rules are solved across levels of government and the necessary data infrastructure is provided to the research community. Earlier plans to establish an independent fiscal institute should be considered again, as this might facilitate the build-up of the necessary data infrastructure while maintaining high data protection standards and ensure an objective and independent analysis of tax data. In the field of labour market analysis such an independent research institute with secured comprehensive data access, namely the Institute for Employment Research (IAB), has greatly facilitated policy impact evaluation. An objective assessment of tax gaps is key, as it could inform the tax enforcement authorities and the public on where additional enforcement efforts would be most effective. Regularly updated tax gap measures could also serve as performance measures to incentivise staff within the tax administration or to improve incentives for tax collection in the decentralised German tax administration system (Sarin and Summers, 2019[108]).
Although global profit shifting, tax avoidance and tax evasion activity has increased since the 2000s, the number of tax inspectors for firms and wealthy households has decreased (Figure 1.27) (Tørsløv, Wier and Zucman, 2022[109]; Wier and Zucman, 2022[116]). This has contributed to a lower frequency of tax audits of firms and wealthy taxpayers. Additional tax revenues collected due to inspections have also decreased, indicating that the decline in human resources has not been compensated by a rise in labour productivity due to digitalisation, for example by better using digital tools to target audits to firms and individuals with a high-risk profile (BMF, 2020[115]). One important factor for the lack of digitalisation and weak tax enforcement capacities is the problematic incentive structure within the decentralised tax administration system (Trautvetter, 2021[117]; BMF, 2004[118]). Tax collection and enforcement is under the responsibility of the Laender, including for federal and co-participated taxes, which is a unique feature of the German system compared to other federal countries like the United States or Australia. The federal fiscal allocation and equalisation scheme reduces incentives for the tax administrations of the Laender to improve tax enforcement, as only a small share of additionally collected tax revenue will accrue to the sub-jurisdiction. Analysis conducted for this Survey indicates that Laender with lower marginal revenue from an additionally collected euro also show lower effective VAT rates (or larger VAT tax gaps) (Figure 1.28). Reducing effective tax rates by underinvesting in tax enforcement might also serve to attract firms and wealthier households to the sub-jurisdiction, similar to detrimental international tax competition (Troost, 2016[119]; BMF, 2004[118]; OECD, 2021[103]).
Figure 1.27. Tax enforcement capacity has decreased
Source: Information provided by Laender parliaments and collected by Netzwerk Steuergerechtigkeit (Trautvetter, 2021[117]).
To address this issue, the federal government sets binding guidelines for the Laender to coordinate tax administration efforts, which can be rejected by the Laender with a simple majority. However, existing guidelines only include targets to lower the administrative burden of tax declarations for businesses and households, but do not target tax enforcement capacities (Trautvetter, 2021[117]). Including targets on tax enforcement capacities in the binding guidelines could be a first step and should be complemented by introducing performance targets for the Laender as soon as the new tax research network can provide Laender-specific tax gap estimates. In addition, the guidelines as well as data on the capacity and performance of tax administrations should be publicly available to hold Laender governments accountable (BMF, 2004[118]). A full centralisation of tax collection of federal and co-participated taxes at the federal level would be the first best solution and has been recommended by the OECD in earlier Economic Surveys of Germany, but seems unfeasible given political and constitutional constraints.
Figure 1.28. Effective VAT rates are lower in Laender with weaker tax enforcement incentives due to the fiscal equalisation scheme
Marginal increase of tax revenue (in %) from an increase in VAT tax collection (by 10%); effective value added tax rates (in %)
Note: Effective VAT rates are calculated by dividing the total amount of collected VAT revenue by private consumption for each Land. Effective VAT rates are reported for the year 2020 as data on private consumption on the Laender level is not yet available for 2021. The marginal total tax revenue refers to the percentage change in total tax revenues of a Land (including tax revenues of its municipalities) from increasing VAT revenue collection in this Land by 10%. The calculated marginal total tax revenues takes into account the contributions and comprehensive redistribution mechanisms within the Finanzkraftausgleich. The city states Berlin, Hamburg and Bremen are excluded from the analysis due to the construction of the effective VAT rate measure: while the collected VAT revenue relates to purchases made in one particular Land, the measure for private consumption is derived from expenditure estimates for households living in a given land. If a non-negligible share of the collected VAT revenue can be attributed to purchases made by persons living in another Land, as is the case for the large city states, the measurement error for effective tax rates is large. The graph shows correlations and does not control for other factors that might be correlated with effective VAT rates and the marginal total tax revenue from an additionally collected euro of VAT.
Source: Federal Ministry of Finance, Federal Statistical Office, Statistical Offices of the Laender and OECD calculations.
Estimations of the VAT gap by the European Commission indicate that Germany loses around 9% of VAT revenue, equivalent to EUR 22 billion each year, related to fraud and evasion schemes (Figure 1.29). Although this share is about average across EU countries, progress in tax enforcement has been weak since 2011, as the number of VAT inspectors and VAT related inspections declined, and the IT infrastructure and the coordination between enforcement authorities of the Laender and with European enforcement agencies are still weak (Figure 1.27) (Bundesrechnungshof, 2020[120]). Recent policy changes have allowed to significantly raise the number of registered online traders and strengthened the receipt requirements for commercial activities. However, there is still no obligation for all firms to use electronic cash registers or automatic e-invoicing and a maximum threshold for cash payments does not exist (OECD, 2022[121]; OECD, 2022[122]). Moreover, cross-border VAT fraud schemes, which deceive tax administrations to refund VAT payments for inputs that have never been paid, have flourished, causing tax revenue losses of up to EUR 14 billion per year (Frunza, 2016[123]). Reversed-charge procedures have closed existing loopholes in certain markets, but led to the shifting of VAT fraud schemes to other products and services (Bundesrechnungshof, 2020[120]). One technical solution to reduce VAT fraud at border-crossings would be to introduce an electronic clearing procedure that documents all cross-border transactions of goods and services and sends the collected data to tax authorities and statistical institutes (Braml and Felbermayr, 2021[124]). Spain, Italy, Hungary and Chile, for example, have successfully implemented mandatory electronic invoicing at the national level (OECD, 2022[125]). To prevent VAT evasion and fraud schemes it is key to introduce the obligation to use electronic cash registers and automatic e-invoicing for all firms, including an electronic clearing procedure for border crossings, and set a maximum threshold for cash payments by implementing the EU anti-money laundering regulation.
Figure 1.29. Progress in strengthening VAT collection has been weak
VAT gap, % of VAT Total Tax Liability (VTTL)
Note: The VAT gap is the overall difference between the expected VAT revenue and the amount actually collected.
Source: European Commission, Directorate-General for Taxation and Customs Union, VAT gap in the EU : report 2021, Study to quantify and analyse the VAT gap in the EU-27 Member States : report 2013.
Other large-scale tax fraud cases, such as so-called cum-ex and cum-cum deals, have led to tax revenue losses of more than EUR 60 billion and highlighted the weaknesses of the decentralised German tax administration system (Spengel, 2017[126]; Spengel, 2021[127]). In cum-ex schemes, international investors in cooperation with German banks (including public banks) have used high-frequency trading around the dividend payment date and differences in tax liabilities to deceive tax authorities and receive refunds of withholding tax for dividends several times, although the tax had been paid only once. This fraud scheme has reduced public resources by more than EUR 10 billion and was facilitated by weak IT infrastructure, a missing tax register for capital gains taxes due to secrecy rules, weak governance structures at supervising authorities and strong lobby influence of the banking industry (Spengel, 2017[126]; Spengel, 2016[128]; BMF, 2020[115]). Although legislative action has narrowed the existing loopholes and strengthened enforcement, significant challenges remain. The dividend tax payment and the refund are still two separate administrative procedures and loopholes related to differing tax liabilities according to resident status and between dividends and profits from selling or lending stocks remain (Spengel, 2021[127]). Cum-cum schemes have exploited the same loopholes, causing tax revenue losses of more than EUR 50 billion (Spengel, 2021[127]). These cum-cum deals have been ruled to be illegal under certain circumstances in 2020, but capacity constraints and weak cooperation among decentralised tax enforcement and prosecution authorities complicate further investigations. The responsible regulator (BAFIN) should gather more data on past financial transactions related to these deals and combine them with data on dividend tax refunds from the federal tax agency to allow gauging the size of foregone tax revenue and better support enforcement authorities (Spengel, 2020[129]; BMF, 2020[115]).
To effectively enforce existing tax laws, it is key to improve the IT and data infrastructure and enable a better cooperation and specialisation of tax enforcement authorities across the Laender and better coordination with other countries (BMF, 2020[115]). Many tax fraud schemes, such as the cum-ex, cum-cum or VAT fraud schemes, operate across national borders and involve complex transactions. Effective detection and investigation of these schemes requires linking tax registers of different tax types and combining them with other data sources to improve analytical and risk-based approaches (OECD, 2021[130]; BMF, 2020[115]). Although special task-forces in the federal tax agency (Bundeszentralamt fuer Steuern) for capital markets and VAT fraud as well as a risk-management system have been established, the necessary data infrastructure is still weak (BMF, 2020[115]; Bundesrechnungshof, 2020[120]). This is due to the strict tax secrecy principle, the prohibition of linking administrative firm and individual data and the fact that tax register data is under the authority of the Laender, which do not provide direct data access for data analysis and risk-based approaches. Tax data on individuals paying dividend taxes is missing, as the tax is collected on an anonymous basis from banks (BMF, 2020[115]). Moreover, tax inspectors and investigators at the sub-regional level do not automatically share information on investigations with other inspectors and investigators, even in the same Land. Establishing shared case files across tax enforcement authorities at the national level could prevent duplicating investigations and allow for a more efficient use of resources and more specialisation (Trautvetter and Schwarz, 2021[95]). Digitalisation of the tax administration can be supported by learning from best practices in other countries, including through the OECD working group on digitalising the tax administration (OECD, 2022[131]).
Due to global profit shifting of multinational enterprises (MNEs), Germany likely loses substantial corporate income tax revenues, which have been estimated to stand between 8% and 29% per year, although measurement is challenging due to limited data availability (Tørsløv, Wier and Zucman, 2022[109]; Fuest et al., 2022[132]; BMF, 2020[115]). To shift profits out of high-tax to low-tax jurisdictions, tax avoidance strategies of MNEs exploit complex trade and financial interactions between subsidiaries of the same firm located in different countries (OECD, 2015[133]). Although the complexity of these transactions has increased over time, the number of tax inspectors and frequency of firm audits as well as audit revenue have decreased (Figure 1.27) (Wier and Zucman, 2022[134]). Strengthening reporting requirements for firms, implementing the planned single electronic firm identifier to facilitate data linkage and improving the existing risk-management system would allow to better focus inspections and audits on high-risk cases and support greater specialisation of tax inspectors. At the same time, it is crucial to continue international cooperation to reduce the scope for global profit shifting. The recent introduction of a minimum tax on profits of German MNEs in line with the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) is an important step forward and will allow Germany to recover some of the foregone tax revenue due to profit shifting.
Tax evasion is strongly linked to asset hiding and money laundering (OECD, 2021[130]). Since 2010, tax enforcement authorities from some Laender have purchased data on hidden financial accounts of German residents in Switzerland and other low-tax countries. This has led to rising revenue related to tax investigations and caused a strong rise in voluntary declarations of offshore accounts (Schwarz and Trautvetter, 2021[135]). Since 2017, the implementation of the OECD common reporting standards has led to very large data inflows on offshore accounts and unreported capital income (OECD, 2017[136]). However, staff and IT capacity constraints at the federal tax agency and tax enforcement agencies of the Laender risk to hinder data analysis and tax investigations. The frequency of audits of high-income taxpayers with yearly income of more than EUR 1 million has even decreased from 15% in 2009 to 5% in 2021, while heterogeneity across tax enforcement districts is large (Figure 1.27) (Trautvetter, 2021[117]).
Fighting money laundering and corruption
In recent years, Germany has strengthened its fight against money laundering (FATF, 2022[137]). This includes the introduction of a national risk assessment (NRA) process, improved coordination between different agencies and levels of government, a significant increase in human and IT resources for the main financial sector regulator (BAFIN) and the Financial Intelligence Unit (FIU), removing limitations in asset recovery and the money laundering offence, and establishing the Transparency Register to improve access to information on beneficial ownership (FATF, 2022[137]). However, significant challenges remain.
To further improve the fight against money laundering and tax evasion it is crucial to continue improving information on asset ownership and better cooperate with enforcement authorities in other countries (Figure 1.30). The recent upgrade of the central transparency register on beneficial ownership to a full register and making registration mandatory are important steps in the right direction, but need to be complemented with higher sanctions for non-compliance and better supervision and verification of information (Collin, Hollenbach and Szakonyi, 2022[138]). Recent issues in enforcing EU sanctions have shown that information remains incomplete, particularly related to real estate. In Germany, ownership information is missing for around 55% of foreign-owned housing assets, which facilitates tax evasion of capital gains and corporate income taxes (Miethe, Peichl and Trautvetter, 2022[139]; Trautvetter, 2020[107]). As the OECD common reporting standard introduced in 2014 does not include real estate assets, illicit financial flows seem to have increasingly targeted real estate investments world-wide (Bomare and Le Guern Herry, 2022[96]; Johannesen, Miethe and Weishaar, 2022[140]). Accelerating the digitalisation and inter-linkage of municipality-specific commercial, real estate and company registers and allowing to link them with other data including on bank accounts and financial assets would support and accelerate the establishment of a comprehensive transparency register of beneficial ownership (Nationaler Normenkontrollrat, 2017[141]). Newly introduced legislation to prohibit cash payments for real estate purchases will help to reduce the scope for money laundering activities, but cash payment thresholds should also be introduced for other asset purchases by implementing the EU anti-money laundering regulation (FATF, 2022[137]).
The plan to create a federal financial police and centralise the supervision of anti-money laundering regulation for the non-financial sector and sanction enforcement under the roof of a new federal agency to combat financial crime is an important step forward (BMF, 2022[142]). This agency will also integrate the Financial Intelligence Unit (FIU), which collects and analyses suspicious transaction reports (STR) related to money laundering. So far, a lack of coordination and capacity constraints among the 300 mostly under-staffed Laender agencies, which have been responsible for the supervision and enforcement of anti-money laundering regulation in the non-financial sector, has led to weak enforcement of reporting requirements and a low quality of suspicious transaction reports (STR) submitted to the FIU (Figure 1.30) (Transparency International, 2021[143]; FATF, 2022[137]). Due to weak coordination and cooperation between the FIU and law and tax enforcement authorities of the Laender, capacity constraints and restricted data access to the transparency register of beneficial ownership, tax registers, and police data, only a small amount of financial intelligence collected by the FIU is used by law enforcement authorities in criminal proceedings (Figure 1.30, Panel F) (FATF, 2022[137]). The government has recently launched an evaluation of the anti-money laundering framework which should be used to set up the new financial police agency so to address these coordination and cooperation issues within the federal system and improve financial intelligence.
Figure 1.30. There is room to improve the fight against money laundering and corruption
Note: Panel B shows the point estimate and the margin of error. Panel D shows sector-based subcomponents of the “Control of Corruption” indicator by the Varieties of Democracy Project.. Panel E summarises the overall assessment on the exchange of information in practice from peer reviews by the Global Forum on Transparency and Exchange of Information for Tax Purposes. Peer reviews assess member jurisdictions’ ability to ensure the transparency of their legal entities and arrangements and to co-operate with other tax administrations in accordance with the internationally agreed standard. The figure shows first round results from the ongoing second round when available, otherwise first round results are displayed. Panel F shows ratings from the FATF peer reviews of each member to assess levels of implementation of the FATF Recommendations. The ratings reflect the extent to which a country’s measures are effective against 11 immediate outcomes. “Investigation and prosecution¹” refers to money laundering. “Investigation and prosecution²” refers to terrorist financing.
Source: Panel A: Transparency International; Panels B & C: World Bank, Worldwide Governance Indicators; Panel D: Varieties of Democracy Institute; University of Gothenburg; and University of Notre Dame; Panel E: OECD Secretariat’s own calculation based on the materials from the Global Forum on Transparency and Exchange of Information for Tax Purposes. Panel F: OECD, Financial Action Task Force (FATF).
If the new federal agency to combat financial crime is sufficiently equipped with investigative powers, skilled staff, IT and comprehensive data access to conduct forensic data analysis, it will significantly improve capacities to detect complex financial crimes, tax fraud and money laundering, and to identify asset ownership. To improve the quality of STRs from the non-financial sector, it is important that information on complex money laundering and tax fraud schemes is disseminated regularly to law enforcement and supervision authorities of the Laender as well as to concerned non-financial sector agents obliged to report suspicious transactions, such as notaries, lawyers, tax consultants, auditors and accountants, and car, precious metal and jewellery dealers (FATF, 2022[137]). Tax authorities should also be better informed, as they are hesitant to submit suspicious information to the FIU due to strict tax secrecy rules, and money laundering risks should be included in the risk criteria to guide tax audits (OECD, 2019[144]). Moreover, increasing awareness of risks and reporting requirements related to money laundering for non-financial sector agents, promoting implementation of preventive measures, improving feedback on reports, and reviewing the interpretation of professional secrecy requirements is key, as the non-financial sector may underreport suspicious transactions (FATF, 2022[137]). This also applies to the financial sector, where the respective supervision authority (BAFIN) focuses on preventive measures, but conducts relatively few independent firm audits and could make more effective use of sanctions (Europaeischer Rechnungshof, 2021[145]; FATF, 2022[137]). This is also an issue for the auditing watchdog, whose investigative capacities suffer from understaffing (Storbeck, 2022[146]).
In addition, more prosecutors specialised in financial crime and money laundering and better international cooperation are needed (Figure 1.30, Panel F). Criminal prosecution is a responsibility of the Laender, and the same incentive issues described above for tax enforcement may also relate to the underinvestment of the Laender in criminal prosecution of money laundering and financial crimes. Capacity constraints at regional prosecution offices have led to a concentration of efforts on simple and small-scale money laundering schemes, but complex and large international money laundering and tax crimes are under-investigated (BMF, 2020[147]; BMF, 2019[148]; Transparency International, 2021[143]; FATF, 2022[137]). One option is to establish binding guidelines for the Laender to ensure sufficient specialised capacities to prosecute financial crime and money laundering and establish a close cooperation among them as well as with the new federal financial police, for example by establishing centralised case file management and tracking. Nordrhein-Westfalen and Hessen can serve as positive recent examples for raising law-enforcement capacities. Continuing to strengthen international cooperation, similar to the European public prosecutor office or joint investigation teams, is crucial to address complex international corruption and money laundering cases (European Commission, 2021[149]; Transparency International, 2021[150]).
Complementing recently improved regulation to confiscate ill-obtained assets with an unexplained suspicious wealth order could support the fight against money laundering and the enforcement of sanctions. However, more effective confiscation would require more specialised staff and a well-functioning transparency register of beneficial ownership. Improving data collection on confiscation and case-related information would help to better understand the structural patterns and scale of money laundering activities (Transparency International, 2021[143]). Improving asset recovery could have the potential to raise public revenue, as an estimated EUR 100 billion of illicit financial flows enter Germany each year (Transparency International, 2021[143]; BMF, 2019[148]).
The perceived risk of corruption remains low, but there is room to improve transparency (Figure 1.30) (Transparency International, 2021[150]). Recent corruption scandals related to public procurement of protective equipment during the pandemic risk reducing trust in institutions and the democratic process. In reaction to the scandals, transparency related to side activities of legislators has been increased and remunerated lobbying activities of legislators were prohibited (Deutscher Bundestag, 2021[151]). The existing criminal offence of bribery of members of parliament was recently upgraded to felony carrying a sentence of imprisonment of one to ten years. However, this only covers actions while exercising the legislative mandate, excluding any other side-activities where legislators might use their status to unduly influence public administration, for example procurement decisions (Bundesgerichtshof, 2022[152]). Broadening the definition of corruption to also include trading in influence, in which a person who has a real or apparent influence on the decision-making of a public official exchanges this influence for an undue advantage, would align German law with international best practices and strengthen the fight against corruption (Lobby Control, 2021[153]; OECD, 2020[154]). Data on side activities of legislators has still not been published by the responsible administration of the parliament due to IT issues (von Salzen, 2022[155]). Transparency related to campaign and party financing can also be strengthened, as thresholds for immediate disclosure of individual donations are relatively high and many loopholes related to sponsoring activities and campaign financing exist (Lobby Control, 2021[153]). Maximum thresholds for party donations and campaign financing, which exist in 19 EU countries, are absent (OECD, 2016[156]). Transparency rules need to be strengthened and better enforced by creating an independent body and a centralised and publicly available up-to-date data base on donations, sponsoring and campaign financing activities.
Increasing transparency on lobbying activities to influence the design of laws and regulations is key to level the playing field and reduce the scope for corruption (OECD, 2021[157]). The introduction of the mandatory transparency register for lobbying activities has been an important step forward, but excludes certain lobby organisations and lower-levels of the administration, where many lobbying activities take place to influence draft bills (OECD, 2022[158]). It also does not track the objectives and outcomes of lobbying activities (Lobby Control, 2021[153]). The current government plans to expand the circle of representatives of special interests which have to register in compliance with fundamental rights, include contacts with lower administration levels in the register, and introduce a legislative footprint, which links lobbying activities to their legislative outcomes. This new register has great potential to strengthen transparency and integrity as well as trust in the political process, but implementing and enforcing the planned register will require equipping the responsible administration of the parliament with sufficient staff and IT capacity (Lobby Control, 2021[153]). In addition to the planned legislative footprint, the register should also contain a regulatory footprint that details the stakeholders who were consulted for drafting regulation, the inputs taken on board, and steps taken to ensure inclusiveness in the development of regulations, as this would further strengthen transparency. Moreover, the public integrity framework for public officials should be better adapted to the specific risks of lobbying by establishing more detailed standards and guidelines for interactions with lobbyists and other stakeholders at all levels of government (OECD, 2021[157]).
Corruption can also be related to the revolving door, when politicians start working at firms or other organisations directly after ending their mandate and use their acquired network and insider information for private interests (Luechinger and Moser, 2014[159]; Lüchinger and Moser, 2022[160]). Although regulation on cooling-off periods of political officials has been introduced in 2015, supervision and enforcement are still weak as the three members of the responsible advisory body are selected by the government and sanctions for non-compliance with the regulation do not exist (European Commission, 2022[161]; GRECO, 2019[162]). The maximum cooling-off period of 18 months seems too short, as empirical studies show that economic benefits from the revolving door can last much longer, and has rarely been applied by the responsible government body (Luechinger and Moser, 2020[163]; Lobby Control, 2021[153]). As lobbying activities of former politicians and high-level bureaucrats have played an important role in the Wirecard scandal, the parliamentary inquiry has recommended to explore reform options to make the notification of any activity mandatory after leaving public office (Deutscher Bundestag, 2021[164]; Lobby Control, 2021[153]). Supervision and enforcement need to be strengthened by introducing rules on the composition and work of the advisory body and sanctions for non-compliance with its decisions. Moreover, data on job transitions and applied cooling-off periods could be improved and made publicly available, in particular for state secretaries and directors.
Whistle blower protection in the private sector needs to be strengthened to support the fight against money laundering and corruption (OECD, 2021[165]). Protection is dependent on relevant court decisions, as in the so-called “Diesel scandal”, reducing incentives for whistleblowing. When transposing into national law the EU Directive to protect whistle blowers, reporting on breaches of German law should also be included in the protection.
Table 1.9. Past recommendations and actions taken on tax enforcement, money laundering and corruption
Modernising the public sector and raising spending efficiency
The modernisation and digitalisation of the public administration is a big challenge, but holds large potential to raise spending efficiency, growth and welfare. According to the OECD Digital Government Index, the public sector is less data driven than in other countries (Figure 1.31). Improving data sharing and IT infrastructure, including access to linked micro data by independent researchers, would facilitate impact evaluation and targeting of policy programmes and raise the quality of public spending (BMWK, 2021[5]). Digitalising public services and the administrative procedures and making them more user-friendly could significantly improve welfare and reduce administrative burden for young and innovative firms, thereby raising business dynamism and productivity (see the previous Economic Survey of Germany) (Figure 1.32). It can also have positive spill-over effects on the adoption of digital technologies in the private sector (Sorbe et al., 2019[166]). Moreover, digitalisation of the public sector can help to address rising skilled labour shortages.
Figure 1.31. Digitalisation of the public administration is low
OECD Digital Government Index, 2019, score 0 to 1
Note: Data are not available for Australia, Hungary, Mexico, Poland, Slovakia, Switzerland, Türkiye and the United States. The OECD Digital Government Index (DGI) is based on the six dimensions of the OECD Digital Government Policy Framework (DGPF): digital by design, data-driven, government as a platform, open by default, user driven and proactiveness. It measures the capacity of the public sector to deliver a coherent and human-centric digital government transformation, as well as the strategic approaches, policy levers, implementation, and monitoring mechanisms in place to deliver the digital government strategy. Thus, it captures much more than just digitising analogue processes (OECD, 2020[167]).
Source: OECD Survey on Digital Government 1.0.
Figure 1.32. The administrative burden is high
Time needed to get operating licences and construction permits (in days), 2021
Source: The World Bank Group, Enterprise Surveys, www.enterprisesurveys.org.
A lack of coordination and cooperation across levels of government complicates the digitalisation of the public administration and reduces spending efficiency (BMWK, 2021[5]). The “Online-Zugangsgesetz” has made online-access to public services mandatory from 2023, but failed to introduce mandatory common standards on design and interlinkages of data and IT tools for all levels of government. Data access and sharing is further complicated by heterogenous interpretations of the EU data protection legislation across Laender administrations and courts. Many municipalities have developed different IT systems for different types of public services, which does not allow to exchange information between databases within nor across municipalities and levels of government, and unique individual identifiers do not exist. This has also strongly reduced spending efficiency, as each municipality signed separate procurement contracts with private providers, who developed similar IT systems for the same public service without using economies of scale across municipalities (BMWK, 2021[5]). Although establishing joint IT development initiatives across municipalities would require a harmonisation of administrative procedures and reduce municipal autonomy to a certain extent, potential spending efficiency gains are large (Nationaler Normenkontrollrat, 2021[4]). Moreover, such initiatives could also lead to significant improvements in the quality of public services due to peer learning effects. The Laender should incentivise such joint initiatives through financial incentives for their municipalities, similar to the federal regulation that funding of IT development is only provided if the solution benefits several Laender and municipalities, and build on the experiences of the municipal think-tank Kommunale Gemeinschaftsstelle (KGSt, 2022[168]). At the Laender-level, the one-for-all initiative has been successful in developing common IT solutions, for example the digital portal to apply for COVID-19 support, and in Schleswig-Holstein a group of municipalities has successfully created an IT procurement group and used a dedicated central purchasing body (OECD, 2019[169]). Common IT standards and data formats should be developed and made mandatory for all levels of government, including obliging all IT services providers to develop products for the public administration in conformity with these standards.
Speeding up planning and approval procedures for infrastructure projects is key to raise public and private investments. Public administrations in municipalities, which are responsible for infrastructure planning and approval, have suffered from financial difficulties and spending cuts that caused staff shortages and insufficient investment in ICT equipment since the early 2000s (see the previous OECD Economic Survey of Germany). These capacity constraints and overly complex and heterogenous regulation across municipalities have led to a high administrative burden for infrastructure projects (Figure 1.32). Improving municipal finances through a comprehensive tax reform (as discussed above) should be complemented by better cooperation between municipalities to bundle resources for infrastructure planning (Allain-Dupré, Hulbert and Vincent, 2017[170]). Improving risk assessment and analysis of market capacity for contracting decisions is key to raise spending efficiency, as exemplified by the OECD Support Tool for Effective Procurement Strategies (STEPS) (Makovšek and Bridge, 2021[52]; OECD, 2021[53]). Implementing STEPS to improve public procurement procedures related to infrastructure projects across all levels of government could yield spending efficiency gains of more than 1% of GDP. Frequent litigation of local interest groups against infrastructure projects and capacity constraints in the judicial system also contribute to long approval times (Budras, 2022[171]). Recent legislation to simplify planning and approval procedures and prioritise energy and train infrastructure over local environmental concerns have the potential to significantly speed up infrastructure projects. However, this should be combined with earlier and better stakeholder involvement in planning procedures complemented with reduced litigation possibilities and the establishment of specialised courts and fast-track procedures.
The federal government has introduced spending reviews in 2015, but their scope and role in budget planning procedures to align spending with policy objectives remains limited due to weak monitoring capabilities (OECD, 2021[172]). Budget allocations are decided with few linkages to policy impact evaluation. This is related to a missing culture of impact evaluation in the public administration, but also to data protection legislation and heterogenous interpretation by Laender courts and data protection agencies that prohibits the use and linkage of micro data across levels of government (Nationaler Normenkontrollrat, 2017[141]; Bachmann, Peichl and Riphahn, 2021[173]). For example, there is no comprehensive real-time household database that would allow better targeting energy price support measures to vulnerable households or evaluate current policies to improve their design. The same is true for firm support measures: so far no impact evaluation of COVID-19 firm support programmes has been conducted due to legal issues related to accessing and linking databases. A subsidy report is published annually by the Ministry of Finance, but it applies a narrow subsidy definition and includes evaluations for only half of the measures, although many subsidies introduce distortions and counteract climate policy objectives (see Chapter 2 for further details) (BMF, 2021[93]; Laaser and Rosenschon, 2020[174]). Moreover, it only covers a narrow set of tax expenditures (Burger and Bretschneider, 2021[175]). Conducting a comprehensive review of existing tax expenditures could help to better prioritise the use of public resources at all levels of government, as tax expenditures tend to be scrutinised less than direct spending which is inspected in yearly budget negotiations (OECD, 2020[176]).
Creating a culture of impact evaluation, establishing the necessary data and IT infrastructure and strengthening the spending review framework in budgeting procedures is key to improve the quality of public spending (Box 1.7) (Tryggvadottir, 2022[177]). This is particularly the case for lower levels of government, where an increasing share of spending is financed by the federal level, weakening accountability and incentives for spending efficiency. If a comprehensive federalism reform to disentangle responsibilities and strengthen the fiscal equivalence principle is not possible, it is key to improve policy impact evaluation to enhance peer learning opportunities across lower levels of government and introduce performance budgeting (Nationaler Normenkontrollrat, 2021[178]). A comprehensive reform of the data sharing infrastructure and corresponding regulation, including the Rueckspielverbot that prohibits accessing, linking and analysing administrative data by the authorities, is crucial to facilitate evidence-based policy making, improve public services and raise spending efficiency at all levels of government (Riphahn, 2023[179]). Some progress has been made, however, in register modernisation. The introduction of a uniform nationwide firm identifier from 2024 will facilitate data sharing and reduce the administrative burden, as firms will need to register their core data with the administration only once. Moreover, the development of a register-census will provide reliable regionalised information at higher frequency.
Box 1.7. Institutionalising comprehensive spending reviews – examples from other OECD countries
Spending reviews can take the form of targeted reviews of specific sectors or programmes to improve public services, as currently done in Germany, or comprehensive reviews, which cover a broader share of the budget. In the Netherlands and Finland, comprehensive spending reviews are launched at the onset of each new government. Both types of spending reviews require high quality data and IT infrastructure as well as specific knowledge, which needs to be developed over a longer time horizon and cannot just be activated within an annual budget cycle. Linking administrative microdata from various sources and providing access to researchers could be one way to improve the quality of data needed for the process.
Each year, the Netherlands conducts regular reviews as part of the annual budget cycle. The review topics and terms of reference are prepared by the Ministry of Finance and presented to the Cabinet at the same meeting at which the budget is presented. The budget director in the Ministry of Finance chairs an interdepartmental steering committee that oversees the process while working groups carry out the specific reviews. An independent chairperson leads each working group of independent experts and civil servants from the Ministry of Finance, the prime minister’s office, and the line ministries. The team’s reports and recommendations have an independent, analytical, and non-political status. The Cabinet decides which recommendations to include in the next budget but does not change the reports before publication. Instead, it communicates a “Cabinet’s View”, which is included in the report.
Some progress has been achieved in the digitalisation of procurement and cooperation across levels of government. A centralised database collects and publishes information on public procurement at all levels of government since 2021, but response rates are low due to weak coverage of e-procurement and a high administrative burden for many municipalities. Mandatory information on tenders, particularly the ones below the EU threshold, is not sufficiently detailed to allow for investigating bidder collusion and spending inefficiencies (BMWK, 2022[181]; OECD, 2019[169]). Many countries, such as the United Kingdom, have established databases of public tenders, improving accountability and facilitating data analysis to detect irregularities and bidder collusion. The introduction of a competition register in 2022 including all firms convicted for corruption or other relevant crimes, which has to be consulted during any public procurement procedure, is an important step forward.
As about 30,000 decentralised procurement bodies are responsible for procurement volumes of around 15% of GDP, scope for raising spending efficiency through e-procurement and more coordination and cooperation across municipalities is large (OECD, 2019[169]). A central e-procurement platform is planned, which would comprise public tenders at all levels of government and significantly lower barriers to bidder participation, particularly for smaller and younger firms, improving competition. Centralised purchasing bodies exist at the federal level and in some Laender, but joint procurement initiatives of municipalities should be further encouraged to reap gains from specialisation and economies of scale, particularly in IT and software procurement (OECD, 2019[169]). However, also at the federal level scope for raising procurement efficiency exists, particularly in defence procurement. Quality of procured equipment has been weak, delivery times long and prices high (Bundesrechnungshof, 2022[182]). Improvements are urgent to ensure the efficient implementation of the EUR 100 billion defence fund.
To modernise and digitalise the public administration and create a culture of impact evaluation, it is crucial to improve skills development and recruitment policies. The public administration suffers from staff shortages and low investment in ICT equipment, which weakens state capacity at all levels of government (Schularick, 2021[9]). As skilled labour shortages are mounting, the public sector needs to improve its recruitment procedures, and invest more in the skills of current staff (Nationaler Normenkontrollrat, 2021[183]). Centralising recruitment procedures, as currently planned at the federal level, would bundle resources and raise the quality of recruitment, and facilitate mobility across institutions improving peer-learning, coordination and cooperation across different parts of the government. Including higher administration posts in standardised recruitment procedures and opening recruitment to external and international candidates could significantly improve management skills sets and organisational quality, and help making the administration more agile, client-oriented and less risk averse, for example concerning the use of digital tools. Improving performance incentive structures and providing sufficient training opportunities, particularly related to digital, management and language skills, would strengthen skills development of current staff. The federal Digital Academy is an important step forward and should encourage similar efforts at the Laender level. Introducing more flexibility in current pay schedules to offer better conditions for specialised posts with high shortages, such as IT or infrastructure planning and procurement experts, and better defining career paths and job profiles is necessary to compete with the private sector and accelerate the modernisation of the public sector (European Commission, 2020[184]).
Table 1.10. Past recommendations and actions taken on modernisation of the public administration and raising spending efficiency
Raising labour supply to reduce fiscal pressures on the pension system
Without further policy changes, rapid population ageing will increase yearly public spending on pension benefits by around 2 percentage points of GDP until 2040 (Figure 1.2). Recent reform efforts are not sufficient to stabilise the pension system. After raising the retirement age to 67 in 2007, the introduction of generous early retirement options, for example the Rente mit 45 Beitragsjahren which allows individuals with at least 45 working years to retire without loss of pension entitlements, reduced incentives to work longer. In 2018, a minimum threshold for the replacement rate (48%) and a maximum threshold for the contribution rate (20%) were fixed until 2025. The government plans to make the threshold for the replacement rate permanent. Keeping this promise would raise spending pressures substantially and reduce fiscal space for public investment and other key expenditures (BMWI, 2021[185]) (Bundesbank, 2022[186]). Better balancing burden sharing between contributors and recipients of pension benefits, including across generations, is needed. However, as the risk of old age poverty is relatively high compared to other countries such as Denmark or the Netherlands, this could comprise a guaranteed minimum pension or an increase in the existing basic income support for old age (BMWI, 2021[185]; OECD, 2021[187]).
Creating the conditions for older workers to work longer is key to stabilise the pension system. Germany made remarkable progress in fostering employment among older workers. Employment rates of persons between 60 and 64 years grew continuously from 20% in 2000 to 61% in 2021. However, while the average retirement age strongly increased during the 2000s, it has not changed much since 2012 (BMAS, 2022[188]). The average effective age of labour market exit is 63 for men and women, which is still about one year below the OECD average for men, while for women the difference is only about 0.2 years (OECD, 2021[187]). The extensive use of early retirement options keeps the effective retirement age significantly below the legal retirement age of currently 66, which will increase to 67 in 2031 (see below). Simulations using the OECD Long Term Model show that further raising employment rates of the elderly would be most effective in stabilising the pension system and reducing fiscal pressures, when compared to other scenarios such as raising immigration, raising the labour force participation of women or coupling the legal retirement age to life expectancy from 2031 onwards (Figure 1.33). Supporting longer working lives should be combined with enabling women to work more. This requires further expanding access to early-childhood education and childcare, including by facilitating and enhancing the quality of childcare services in small groups and all-day care, and reforming joint income taxation for couples (see above and the previous OECD Economic Survey of Germany). Facilitating skilled migration would support potential growth and help to stabilise the pension system, as it increases the number of contributors (see above). Linking the legal retirement age to life expectancy from 2031 is a necessary step to stabilise the pension system in the longer term. In the medium-term, efforts should focus on raising the effective retirement age.
Figure 1.33. Raising the effective retirement age is crucial to stabilise pension spending
Public spending on pensions (% of GDP)
Note: The graphs show the effects of different scenarios for public spending on pensions in Germany using the methodology of (Guillemette and Turner, 2021[3]). The scenario “Increasing full time work of women” assumes that the share of women working part time is reduced to the one in Denmark until 2035. The scenario “Raising employment rates of the elderly” assumes that the effective retirement age increases by 0.6 years until 2029 relative to the baseline (and by 1.6 years until 2045). The scenario “Increasing migration” uses the population projections from Destatis which assume high net migration inflows over the projection horizon (300 000 per year from 2030 onwards), whereas the baseline assumes the Destatis baseline of 206 000 migrants per year).
Source: OECD Long Term Model.
Reducing fiscal disincentives to work longer is key to extend working lives. Since 2014, individuals with at least 45 working years can retire without loss of pension entitlements. For individuals with at least 35 working years, pension benefit reductions for early retirement are much smaller than in other OECD countries, explaining the relatively high share of workers that retire early and accept pension benefit reductions (OECD, 2021[187]). Moreover, since 2017 partial pensions and wage earnings can be combined more flexibly without loss of pension entitlements before reaching the statutory retirement age (Flexi-Rente). This provides incentives to raise labour supply for individuals who have retired early but might at the same time encourage early retirement. The Flexi-Rente also provides incentives to continue working beyond the statutory retirement age by introducing the option to raise pension benefits by working longer. Redesigning early retirement options and evaluating the incentive structures of the Flexi-Rente and eventually adapting them is needed to raise incentives to work longer. The abolishment of the maximum threshold for wage earnings that are not deducted from pension entitlements received before the statutory retirement age should be carefully evaluated, as this might further increase incentives to retire earlier.
To promote longer working lives, it is also crucial to improve adult learning. Due to increasing labour shortages firms have greater incentives to retain older employees. While only 26% of companies wanted to keep their workers who were eligible for pensions in 2015, the share increased to 58% in 2018. However, more than half of workers, who were retained after reaching the statutory pension age, switched to part-time employment, mostly in Mini-Jobs that are exempted from social security contributions (Westermeier and Wolf, 2020[189]). Fostering regular employment of older workers requires continuous updating of skills, particularly digital skills. Elderly workers with higher basic digital skills have better employment chances, higher wages and are less likely to be replaced by technology (Falck, Lindlacher and Wiederhold, 2022[190]). However, older workers are much less likely to participate in adult learning, which is mainly related to ageist attitudes of employers, time constraints at work and limited or inadequate training opportunities, but also to lower basic skills and motivation of older workers (OECD, 2021[191]; OECD, 2019[192]; van Dalen and Henkens, 2019[193]). A promising step to tackle the participation gap was taken by the Skills Development Opportunities and Work of Tomorrow Acts, which cover training costs of workers older than 45 years for SMEs. However, continuing vocational education and training (CVET) programmes need to be better targeted and adapted to older workers, for example by providing greater support when using digital learning devices, and combined with targeted career advice and guidance services (KOFA, 2022[194]; OECD, 2019[192]).
Working conditions will have to adapt to promote longer working lives. Increasing the retirement age of women from 60 to 63 has increased psychological diseases, obesity and arthrosis among women affected by the reform, as many employers have not adapted working conditions (Barschkett, Geyer and Haan, 2022[195]). Improving preventative health services at the workplace is key to enable longer working lives. To adjust working conditions to the needs and capacities of older employees, firms should offer more flexible working hours, more part-time work, more vacation and extend home office arrangements (KOFA, 2022[194]). Promoting longer working lives is also key for the public sector. In 2018, only 20% of public employers planned to retain their workers eligible for retirement, which is significantly below the average in the private sector (Westermeier and Wolf, 2020[189]).
Plans to strengthen the funded elements of the pension system are welcome but should be scaled up. Existing funded individual pensions (Riester Rente) are decentralised and mostly take the form of insurance-based products, restricting investment opportunities and resulting in high commissions and low expected returns, which explains their limited uptake (BMF, 2022[196]). The government plans to introduce a standardised investment product with an opt-out option, which could lower costs and raise returns and participation in funded individual pension schemes. A debt-financed fund of EUR 10 billion will be introduced, which will transfer its investment returns to the public pension system in the 2030s. While this could help to reduce fiscal pressures from the public pension system, the success of this measure critically depends on the interest rate differential between government bonds and equity returns. In an environment of heightened uncertainty, monetary tightening and rising debt levels, the room to exploit the interest rate differential might be severely restricted. Allowing the new public fund as well as individual pension plans to invest part of their assets in VC funds for start-ups could improve returns and support innovation and business dynamism.
Table 1.11. Past recommendations and actions taken on pensions
KPI findings and recommendations (key recommendations in bold)
References
[27] Abrizio, S. et al. (2022), “Market Size and Supply Disruptions: Sharing the Pain from a Russian Gas Shut-off to the EU”, IMW Working Paper, Vol. 2022/143.
[170] Allain-Dupré, D., C. Hulbert and M. Vincent (2017), “Subnational Infrastructure Investment in OECD Countries: Trends and Key Governance Levers”, OECD Regional Development Working Papers, No. 2017/05, OECD Publishing, Paris, https://doi.org/10.1787/e9077df7-en.
[110] Alstadsæter, A., N. Johannesen and G. Zucman (2019), “Tax Evasion and Inequality”, American Economic Review, Vol. 109/6, pp. 2073-2103, https://doi.org/10.1257/aer.20172043.
[30] Altavilla, C., F. Canova and M. Ciccarelli (2020), “Mending the broken link: Heterogeneous bank lending rates and monetary policy pass-through”, Journal of Monetary Economics, Vol. 110, pp. 81-98, https://doi.org/10.1016/j.jmoneco.2019.01.001.
[62] Asatryan, Z., F. Heinemann and J. Nover (2022), “The Other Government: State-Owned Enterprises in Germany and their Implications for the Core Public Sector”, ZEW Expert Brief, Vol. 8.
[42] Azahaf, N. (2020), Fostering transnational skills partnerships in Germany, Bertelsmann Stiftung.
[205] Aziakpono, M. and M. Wilson (2013), “Interest Rate Pass-through and Monetary Policy Regimes in South Africa”, African Economic Research Consortium.
[40] BA (2022), Gemeldete Arbeitsstellen nach Berufen (Engpassanalyse), Bundesagentur fuer Arbeit.
[21] Bachmann et al., R. (2022), “How it can be done”, ECON tribute Policy Brief, Vol. 34.
[173] Bachmann, R., A. Peichl and R. Riphahn (2021), “Bessere Daten – bessere Politik”, Franfurter Allgemeine Zeitung, https://www.faz.net/-gqe-aehej.
[78] Bach, S. (2021), “Aktuelle Reformvorschläge zum Einkommensteuertarif”, Wirtschaftsdienst, Vol. 101/8, pp. 606-614, https://doi.org/10.1007/s10273-021-2979-1.
[83] Bach, S. and S. Eichfelder (2021), “Reform der Immobilienbesteuerung: Bodenwerte belasten und Privilegien streichen”, DIW Wochenbericht, Vol. 27.
[68] Bach, S. et al. (2020), “Reform des Ehegattensplittings: Realsplitting mit niedrigem Übertragungsbetrag ist ein guter Kompromiss”, DIW Wochenbericht, Vol. 41.
[7] Baer, H. et al. (2023), Klima- und Finanzpolitik zusammendenken: Wechselwirkungen und Zielkonflikte, Bertelsmann Stiftung.
[89] Balestra, C. and R. Tonkin (2018), “Inequalities in household wealth across OECD countries: Evidence from the OECD Wealth Distribution Database”, OECD Statistics Working Papers, No. 2018/01, OECD Publishing, Paris, https://doi.org/10.1787/7e1bf673-en.
[17] Barnes, S. et al. (2021), “The impact of COVID-19 on corporate fragility in the United Kingdom: Insights from a new calibrated firm-level Corporate Sector Agent-Based (CAB) Model”, OECD Economics Department Working Papers, No. 1674, OECD Publishing, Paris, https://doi.org/10.1787/b6805eed-en.
[195] Barschkett, M., J. Geyer and P. Haan (2022), “Anhebung des Renteneintrittsalters hat negative Konsequenzen für die Gesundheit”, DIW Wochenbericht, https://doi.org/10.18723/diw_wb:2022-41-1.
[102] Bastani, S. and D. Waldenström (2021), “Perceptions of Inherited Wealth and the Support for Inheritance Taxation”, Economica, Vol. 88/350, pp. 532-569, https://doi.org/10.1111/ecca.12359.
[34] Battistini, N., J. Gareis and R. Moreno (2022), “The impact of rising mortgage rates on the euro area housing market”, ECB Economic Bulletin, Vol. 6.
[63] Beckmannshagen, M. and C. Schröder (2022), “Entwicklung der Arbeitszeiten treibt die Ungleichheit der Erwerbseinkommen”, DIW Wochenbericht, Vol. 33/34, https://doi.org/10.18723/diw_wb:2022-33-1.
[97] Bennedsen, M. and K. Nielsen (2016), Governance of family firms in Denmark: The economic consequences of ownership change in Denmark, Copenhagen Business School.
[98] Bennedsen, M. et al. (2007), “Inside the Family Firm: The Role of Families in Succession Decisions and Performance”, The Quarterly Journal of Economics, Vol. 122/2, pp. 647-691, https://doi.org/10.1162/qjec.122.2.647.
[45] BIBB (2022), BIBB Datenreport 2022.
[1] Bickmann, M., R. Grundke and D. Smith (forthcoming), “Saving the German growth model - the importance of migration for maintaining competitiveness”.
[200] Bischof et al., J. (2022), The German Business Panel: Evidence on Accounting and Business Taxation.
[16] Bischof, J. et al. (2021), “The Importance of Cost Structure for the Effectiveness of State Aid”, Wirtschaftsdienst, Vol. 101/7, pp. 536-543, https://doi.org/10.1007/s10273-021-2962-x.
[81] Black, S. et al. (2021), “Scaling up Climate Mitigation Policy in Germany”, IMF Working Paper Series, No. 21/241, IMF.
[64] Bloemer, M. et al. (2021), “Für mehr Beschäftigung und mehr steuerliche Entlastung für Familien: Ein Reformvorschlag zur Einkommensbesteuerung”, Ifo Schnelldienst, Vol. 74/10.
[67] Bloemer, M. and V. Consiglio (2022), “Reform der Mini- und Midijobs: Verschärft die Ampel-Koalition die Teilzeitfalle?”, Ifo Schnelldienst, Vol. 4.
[99] Bloom, N. and J. Van Reenen (2010), “Why Do Management Practices Differ across Firms and Countries?”, Journal of Economic Perspectives, Vol. 24/1, pp. 203-224, https://doi.org/10.1257/jep.24.1.203.
[188] BMAS (2022), Rentenversicherungsbericht 2022, Bundesministerium fuer Arbeit und Soziales.
[196] BMF (2022), Kapitalgedeckte Rente: Ein neuer Anlauf?, Wissenschaftlicher Beirat beim Bundesministerium der Finanzen,.
[142] BMF (2022), Stepping up the fight against financial crime, Bundesministerium fuer Finanzen.
[93] BMF (2021), 28. Subventionsbericht des Bundes, Bundesministerium der Finanzen.
[147] BMF (2020), National Risk Analysis on Combating Money Laundering and Terrorist Financing - Preliminary Investigations and Criminal Proceedings against Money Laundering in Germany from 2014-16., Bundesministerium der Finanzen.
[115] BMF (2020), Notwendigkeit, Potenzial und Ansatzpunkte einer Verbesserung der Dateninfrastruktur für die Steuerpolitik, Wissenschaftlicher Beirat beim Bundesministerium der Finanzen.
[148] BMF (2019), Erste Nationale Risikoanalyse - Bekämpfung von Geldwäsche und Terrorismusfinanzierung, Bundesministerium der Finanzen.
[118] BMF (2004), Effizienz und Effektivität in der Steuerverwaltung -Positionspapier des Bundesministeriums der Finanzen, Bundesrat der Bundesrepublik Deutschland.
[185] BMWI (2021), Vorschläge für eine Reform der gesetzlichen Rentenversicherung, Wissenschaftliche Beirat beim Bundesministerium für Wirtschaft und Energie, http://www.bmwi.de.
[202] BMWK (2022), “Quo vadis Potenzialschaetzung”, Schlaglichter der Wirtschaftspolitik, Vol. November 2022.
[15] BMWK (2022), Überblickspapier Corona-Hilfen.
[181] BMWK (2022), Vergabestatistik - Bericht fuer das erste Halbjahr 2021, Bundesministerium fuer Wirtschaft und Klimaschutz.
[5] BMWK (2021), Digitalisierung in Deutschland – Lehren aus der Corona-Krise, Bundesministerium fuer Wirtschaft und Klimaschutz.
[50] Bock-Famulla, K. et al. (2022), “Fachkräfte-Radar für KiTa und Grundschule 2022”, https://doi.org/10.11586/2022066.
[23] Böhringer, C., T. Rutherford and J. Schneider (2021), “The incidence of CO2 emissions pricing under alternative international market responses”, Energy Economics, Vol. 101, p. 105404, https://doi.org/10.1016/j.eneco.2021.105404.
[96] Bomare, J. and S. Le Guern Herry (2022), “Will we ever be able to track offshore wealth? Evidence fromthe offshore real estate market in the UK”, EU Tax Observatory Working Paper, Vol. 4.
[124] Braml, M. and G. Felbermayr (2021), “The EU self-surplus puzzle: an indication of VAT fraud?”, International Tax and Public Finance, Vol. 29/5, pp. 1075-1097, https://doi.org/10.1007/s10797-021-09713-x.
[69] Bruckmeier, K. et al. (2022), “Reform der geringfügigen Beschäftigung Reform der geringfügigen Beschäftigung”, IAB Stellungnahme, https://doku.iab.de/stellungnahme/2022/sn0222.pdf (accessed on 20 September 2022).
[171] Budras, C. (2022), “Mit der Windkraft schneller zum Ziel”, Frankfurter Allgemeine Zeitung, https://www.faz.net/-gqe-auu8k.
[70] Bundesagentur fuer Arbeit (2022), “Die Arbeitsmarktsituation von Frauen und Maennern 2021”, Berichte: Blickpunkt Arbeitsmarkt Juni 2022.
[51] Bundesbank (2023), Monthly Report February 2023.
[61] Bundesbank (2022), “Die Schuldenbremse des Bundes:”, Monatsbericht April, Vol. 53.
[33] Bundesbank (2022), “Financial Stability Review”.
[59] Bundesbank (2022), “Länderfinanzen 2021: Überschuss und zusätzliche Reserven aus Notlagenkrediten”, Monatsbericht Oktober 2022, Vol. 15.
[58] Bundesbank (2022), Monthly report April 2022.
[56] Bundesbank (2022), Monthly report February 2022.
[14] Bundesbank (2022), “Monthly Report November 2022”, Vol. 71.
[186] Bundesbank (2022), Pension insurance scheme: long-term scenarios and reform options.
[152] Bundesgerichtshof (2022), BGH entscheidet zur Strafbarkeit wegen Bestechlichkeit und Bestechung von Mandatsträgern in der sog. Maskenaffäre.
[26] Bundesnetzagentur (2023), Bericht zu Stand und Entwicklung der Versorgungssicherheit im Bereich der Versorgung mit Elektrizität.
[182] Bundesrechnungshof (2022), Korruptionsprävention im größten Beschaffungsamt der Bundeswehr seit Jahren mangelhaft, Bundesministerium der Verteidigung (BMVg).
[120] Bundesrechnungshof (2020), Bericht nach § 99 der Bundeshaushaltsordnung über Maßnahmen zur Verbesserung der Umsatzsteuerbetrugsbekämpfung – Chancen der Digitalisierung nutzen, Deutscher Bundestag, https://dserver.bundestag.de/btd/19/240/1924000.pdf.
[175] Burger, A. and W. Bretschneider (2021), Umweltschaedliche Subventionen in Deutschland, Umweltbundesamt.
[20] Calligaris, S. et al. (forthcoming), “Employment dynamics across firms during Covid-19: The role of job retention schemes”, OECD Economics Department Working Paper.
[138] Collin, M., F. Hollenbach and D. Szakonyi (2022), “The Impact of Beneficial Ownership Transparency on llicit Purchases of U.S. Property.”, Brookings Global Working Paper.
[12] Demmou, L. et al. (2021), “Insolvency and debt overhang following the COVID-19 outbreak: Assessment of risks and policy responses”, OECD Economics Department Working Papers, No. 1651, OECD Publishing, Paris, https://doi.org/10.1787/747a8226-en.
[90] Destatis (2022), Festgesetztes Betriebsvermögen bei Schenkungen 2021 mehr als verdoppelt, https://www.destatis.de/DE/Presse/Pressemitteilungen/2022/07/PD22_308_736.html.
[151] Deutscher Bundestag (2021), 19. Wahlperiode, Drucksache 19/30492, https://dserver.bundestag.de/btd/19/304/1930492.pdf.
[164] Deutscher Bundestag (2021), Beschlussempfehlung und Bericht des 3. Untersuchungsausschusses der 19. Wahlperiode gemäß Artikel 44 des Grundgesetzes, Deutscher Bundestag.
[39] DIHK (2022), DIHK Business Survey Early Summer 2022, Deutsche Industrie und Handelskammer.
[105] Dinauer, R., A. Kammerer and K. Ott (2022), “Das Problem beginnt dort, wo dem Fiskus etwas vorgespielt wird”, Sueddeutsche Zeitung.
[46] DIPF (2022), Bildung in Deutschland 2022, Leibniz-Institut für Bildungsforschung und Bildungsinformation.
[80] Dziadkowski, D. (2022), “Die Einkommensteuer im Lichte von Progression und Inflation”, Ifo Schnelldienst, Vol. 75/6, pp. 55-58.
[32] ECB (2022), Financial Stability Review May 2022, European Central Bank.
[72] Eckstein, Z., E. Lifshitz and T. Larom (2018), “The labor market as an engine for growth and poverty reduction”, Aaron Institute for Economic Policy Working Paper.
[76] Elgin, C. et al. (2021), “Understanding Informality”, SSRN Electronic Journal, https://doi.org/10.2139/ssrn.3914265.
[44] Enquete-Kommission Berufliche Bildung (2021), Berufliche Bildung in der digitalen Arbeitswelt.
[11] Epaulard, A. and C. Zapha (2022), “Bankruptcy costs and the design of preventive restructuring procedures”, Journal of Economic Behavior & Organization, Vol. 196, pp. 229-250, https://doi.org/10.1016/j.jebo.2022.02.001.
[145] Europaeischer Rechnungshof (2021), EU-Maßnahmen gegen Geldwäsche im Bankensektor sind fragmentiert und werden unzulänglich umgesetzt, Europaeischer Rechnungshof.
[161] European Commission (2022), 2022 Rule of Law Report. Country Chapter on the rule of law situation in Germany., https://commission.europa.eu/system/files/2022-07/16_1_193990_coun_chap_germany_en.pdf.
[149] European Commission (2021), EU Strategy to tackle Organised Crime 2021-2025, European Commission.
[184] European Commission (2020), ProcureComp EU European Competency Framework for Public Procurement Professionals.
[35] Falck, O. et al. (2022), “Wie könnte das Potenzial solo-selbständiger Wissensarbeit besser genutzt werden”, Ifo Schnelldienst, Vol. 75/11.
[190] Falck, O., V. Lindlacher and S. Wiederhold (2022), “Elderly Left Behind? How Older Workers Can Participate in the Modern Labor Market”, EconPol Forum, Vol. 23/05, pp. 16-19.
[137] FATF (2022), Anti-money laundering and counter-terrorist financing measures –Germany, Fourth Round Mutual Evaluation Report, Financial Action Task Force, Paris.
[75] Feld, L., M. Iglesias and B. Weigert (2015), “Putting Germany’s ‘mini-jobs’ in their context”, El Pais.
[54] Freundl, V., C. Stiegler and L. Zierow (2021), “Europas Schulen in der Corona-Pandemie–ein Ländervergleich”, ifo Schnelldienst.
[123] Frunza, M. (2016), “Cost of the MTIC Vat Fraud for European Union Members”, SSRN Electronic Journal, https://doi.org/10.2139/ssrn.2758566.
[55] Fuchs-Schuendeln, N. (2022), “Covid-Induced School Closures in the US and Germany: Long term Distributional Effects”, CES Ifo working paper, Vol. No. 9698.
[132] Fuest, C. et al. (2022), “Global Profit Shifting of Multinational Companies: Evidence from CbCR Micro Data”, CESifo Working Paper No. 9757.
[82] Fuest, C., J. Hey and C. Spengel (2021), “Vorschläge für eine Reform der Immobilienbesteuerung”, Ifo Schnelldienst, Vol. 74/12.
[91] Grabka, M. and A. Tiefensee (2017), “Das Erbvolumen in Deutschland dürfte um gut ein Viertel größer sein als bisher angenommen”, DIW Wochenbericht, Vol. 27.
[162] GRECO (2019), Fifth Evaluation Report. Germany. Preventing corruption and promoting integrity in central governments (top executive functions) and law enforcement agencies, https://rm.coe.int/fifth-evaluation-round-preventing-corruption-and-promoting-integrity-i/1680a0b8d7.
[3] Guillemette, Y. and D. Turner (2021), “The long game: Fiscal outlooks to 2060 underline need for structural reform”, OECD Economic Policy Papers, No. 29, OECD Publishing, Paris, https://doi.org/10.1787/a112307e-en.
[86] Guvenen, F. et al. (2019), Use It or Lose It: Efficiency Gains from Wealth Taxation, National Bureau of Economic Research, Cambridge, MA, https://doi.org/10.3386/w26284.
[111] Guyton, J. et al. (2021), Tax Evasion at the Top of the Income Distribution: Theory and Evidence, National Bureau of Economic Research, Cambridge, MA, https://doi.org/10.3386/w28542.
[29] Haramboure, A. et al. (forthcoming), “Policies to strengthen the resilience of global value chains: Empirical evidence from the COVID-19 shock”, OECD STI Working Paper.
[19] Heinemann, F. (2022), “Moving from Broad to Targeted Pandemic Fiscal Support”, Ces ifo EconPol Policy Report.
[49] Hermes, H. et al. (2021), “Behavioral Barriers and the Socioeconomic Gap in Child Care Enrollment”, Cesifo working paper, Vol. 9282.
[94] Houben, H. and R. Maiterth (2011), “Endangering of Businesses by the German Inheritance Tax? — An Empirical Analysis”, Business Research, Vol. 4/1, pp. 32-46, https://doi.org/10.1007/bf03342725.
[106] Huether, M., J. Suedekum and M. Voigtlaender (eds.) (2019), Die kommunalen Finanzen, Institut der Deutschen Wirtschaft.
[31] IMF (2022), Germany - Article 4 report.
[180] IMF (2022), How to Design and Institutionalize Spending Reviews.
[113] IMF (2021), The Revenue Administration Gap Analysis Program - An Analytical Framework for Personal Income Tax Gap Estimation, International Monetary Fund.
[79] Immervoll, H. (2005), “FALLING UP THE STAIRS: THE EFFECTS OF “BRACKET CREEP” ON HOUSEHOLD INCOMES”, Review of Income and Wealth, Vol. 51/1, pp. 37-62, https://doi.org/10.1111/j.1475-4991.2005.00144.x.
[48] Jessen, J., S. Schmitz and S. Waights (2020), “Understanding day care enrolment gaps”, Journal of Public Economics, Vol. 190, p. 104252, https://doi.org/10.1016/j.jpubeco.2020.104252.
[92] Jirmann, J. (2022), Erbschaftsteuer: Nicht für Superreiche, Netzwerk Steuergerechtigkeit.
[140] Johannesen, N., J. Miethe and D. Weishaar (2022), “Homes Incorporated: Offshore Ownership of Real Estate in the U.K”, mimeo.
[77] Kelmanson, B. et al. (2019), “Explaining the Shadow Economy in Europe: Size, Causes and Policy Options”, IMF Working Paper Series, No. 19/278.
[18] KFW (2022), KfW-Mittelstandspanel 2022 - Der Mittelstand hat die Pandemie weitgehend verdaut, aber Ukraine Krieg und Energiekrise verdüstern die Aussichten, Kreditanstalt fuer Wiederaufbau.
[168] KGSt (2022), Verwaltungsdigitalisierung organisieren und messen. Ergebnisse der Vergleichsarbeit, Kommunale Gemeinschaftsstelle.
[36] Klug, T., E. Mayer and T. Schuler (2021), “The corporate saving glut and the current account in Germany”, ECB Working Paper Series, Vol. 2586.
[194] KOFA (2022), Ältere am Arbeitsmarkt, http://www.kofa.de.
[2] KOFA (2022), Jahresrueckblick 2021.
[100] Kuziemko, I. et al. (2015), “How Elastic Are Preferences for Redistribution? Evidence from Randomized Survey Experiments”, American Economic Review, Vol. 105/4, pp. 1478-1508, https://doi.org/10.1257/aer.20130360.
[174] Laaser, C. and A. Rosenschon (2020), “Kieler Subventionsbericht 2020: Subventionen auf dem Vormarsch”, Kieler Beitraege zur Wirtschaftspolitik, Vol. 29.
[153] Lobby Control (2021), Lobbyreport 2021 - Beispiellose Skandale – strengere Lobbyregeln: Eine Bilanz von vier Jahren Schwarz-Rot, Lobby Control e.V. Initiative fuer Transparenz und Demokratie.
[160] Lüchinger, S. and C. Moser (2022), “Das Revolving-Door-Phänomen: Die Drehtür zwischen Politik und Wirtschaft”, in Handbuch Lobbyismus, Springer Fachmedien Wiesbaden, Wiesbaden, https://doi.org/10.1007/978-3-658-32324-0_28-1.
[163] Luechinger, S. and C. Moser (2020), “The European Commission and the revolving door”, European Economic Review, Vol. 127, p. 103461, https://doi.org/10.1016/j.euroecorev.2020.103461.
[159] Luechinger, S. and C. Moser (2014), “The value of the revolving door: Political appointees and the stock market”, Journal of Public Economics, Vol. 119, pp. 93-107, https://doi.org/10.1016/j.jpubeco.2014.08.001.
[52] Makovšek, D. and A. Bridge (2021), “Procurement Choices and Infrastructure Costs”, in Poterba, J. and E. Glaeser (eds.), NBER Economic Analysis and Infrastructure Investment, Chicago University Press, https://www.nber.org/system/files/chapters/c14358/revisions/c14358.rev1.pdf (accessed on 5 March 2021).
[22] Mertens, M. and S. Mueller (2022), “Wirtschaftliche Folgen des Gaspreisanstiegs für die deutsche Industrie”, IWH Policy Notes, Vol. 22/2.
[139] Miethe, J., A. Peichl and C. Trautvetter (2022), “Die Rolle von anonymen Immobilieneigentümern am deutschen Immobilienmarkt: Erste Ergebnisse einer systematischen Datenauswertung”, Ifo Schnelldienst digital, Vol. 3/6.
[10] Moeller, M. and P. Mukherjee (2019), “Early warning systems in denamrk and Europe”, Eurfenix Insol Europe.
[114] Murphy, R. (2019), The European Tax Gap, European Parliament.
[183] Nationaler Normenkontrollrat (2021), Deutschland ist, denkt und handelt zu kompliziert. Was jetzt getan werden muss, um Staat und Verwaltung zkunftsfester zu machen,., Nationaler Normenkontrollrat.
[178] Nationaler Normenkontrollrat (2021), Initiative leistungsfaehige Verwaltung - Zukunftsfester Staat. Empfehlungen für eine nachhaltige Modernisierung – in der Krise, wie im Alltag, Nationaler Normenkontrollrat.
[4] Nationaler Normenkontrollrat (2021), Zukunftsfester Staat – weniger Bürokratie, praxistaugliche Gesetze und leistungsfähige Verwaltung.
[141] Nationaler Normenkontrollrat (2017), Mehr Leistung für Bürger und Unternehmen: Verwaltung digitalisieren. Register modernisieren., Nationaler Normenkontrollrat.
[57] Ochsner, C. and C. Zuberer (2022), “Die Konjunkturbereinigung der Schuldenbremse: ein Plädoyer für methodische Reformen”, Wirtschaftsdienst, Vol. 102/11.
[122] OECD (2022), Consumption Tax Trends 2022: VAT/GST and Excise, Core Design Features and Trends, OECD Publishing, Paris, https://doi.org/10.1787/6525a942-en.
[8] OECD (2022), OECD COVID-19 Health Indicators.
[13] OECD (2022), OECD Economic Outlook, Volume 2022 Issue 2, OECD Publishing, Paris, https://doi.org/10.1787/f6da2159-en.
[38] OECD (2022), OECD Reviews of Innovation Policy: Germany 2022: Building Agility for Successful Transitions, OECD Reviews of Innovation Policy, OECD Publishing, Paris, https://doi.org/10.1787/50b32331-en.
[112] OECD (2022), OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022, OECD Publishing, Paris, https://doi.org/10.1787/0e655865-en.
[158] OECD (2022), “Regulating corporate political engagement: Trends, challenges and the role for investors”, OECD Public Governance Policy Papers, No. 13, OECD Publishing, Paris, https://doi.org/10.1787/8c5615fe-en.
[6] OECD (2022), Revenue Statistics 2022: The Impact of COVID-19 on OECD Tax Revenues, OECD Publishing, Paris, https://doi.org/10.1787/8a691b03-en.
[131] OECD (2022), Statement of Outcomes - Forum on tax administration Plenary 2022.
[121] OECD (2022), Tax Administration 2022: Comparative Information on OECD and other Advanced and Emerging Economies, OECD Publishing, Paris, https://doi.org/10.1787/1e797131-en.
[125] OECD (2022), Tax Administration 3.0 and Electronic Invoicing: Initial Findings, OECD Forum on Tax Administration, OECD Publishing, Paris, https://doi.org/10.1787/2ffc88ed-en.
[87] OECD (2022), Tax Policy Reforms 2022: OECD and Selected Partner Economies, OECD Publishing, Paris, https://doi.org/10.1787/067c593d-en.
[66] OECD (2022), Taxing Wages 2022: Impact of COVID-19 on the Tax Wedge in OECD Countries, OECD Publishing, Paris, https://doi.org/10.1787/f7f1e68a-en.
[41] OECD (2022), Wer will nach Deutschland? Eine Umfrage unter Fachkräften im Ausland, https://blog.oecd-berlin.de/wer-will-nach-deutschland (accessed on 23 January 2023).
[191] OECD (2021), Continuing Education and Training in Germany, Getting Skills Right, OECD Publishing, Paris, https://doi.org/10.1787/1f552468-en.
[130] OECD (2021), Fighting Tax Crime – The Ten Global Principles, Second Edition: Country Chapters, OECD Publishing Paris.
[103] OECD (2021), Fiscal Federalism 2022: Making Decentralisation Work, OECD Publishing, Paris, https://doi.org/10.1787/201c75b6-en.
[172] OECD (2021), Government at a Glance 2021, OECD Publishing, Paris, https://doi.org/10.1787/1c258f55-en.
[165] OECD (2021), Implementing the OECD Anti-Bribery Convention - Phase 4 Two year follow up report: Germany, OECD Publishing Paris.
[84] OECD (2021), Inheritance Taxation in OECD Countries, OECD Tax Policy Studies, No. 28, OECD Publishing, Paris, https://doi.org/10.1787/e2879a7d-en.
[157] OECD (2021), Lobbying in the 21st Century: Transparency, Integrity and Access, OECD Publishing, Paris, https://doi.org/10.1787/c6d8eff8-en.
[104] OECD (2021), Making Property Tax Reform Happen in China: A Review of Property Tax Design and Reform Experiences in OECD Countries, OECD Fiscal Federalism Studies, OECD Publishing, Paris, https://doi.org/10.1787/bd0fbae3-en.
[37] OECD (2021), Pension Markets in Focus 2021, OECD Publishing Paris, https://www.oecd.org/finance/private-pensions/globalpensionstatistics.htm.
[187] OECD (2021), Pensions at a Glance 2021: OECD and G20 Indicators, OECD Publishing, Paris, https://doi.org/10.1787/ca401ebd-en.
[53] OECD (2021), Procurement Strategy in Major Infrastructure Projects: Piloting a New Approach in Norway, OECD Publishing Paris.
[167] OECD (2020), “Digital Government Index: 2019 results”, OECD Public Governance Policy Papers, No. 03, OECD Publishing, Paris, https://doi.org/10.1787/4de9f5bb-en.
[197] OECD (2020), OECD Economic Surveys: Germany 2020, OECD Publishing, Paris, https://doi.org/10.1787/91973c69-en.
[154] OECD (2020), OECD Public Integrity Handbook, OECD Publishing, Paris, https://doi.org/10.1787/ac8ed8e8-en.
[176] OECD (2020), Tax Expenditures and Corrective Taxes in Chile: A joint IMF/OECD Assessment, OECD Publishing Paris.
[144] OECD (2019), Money Laundering and Terrorist Financing Awareness Handbook for Tax Examiners and Tax Auditors, OECD Publishing, Paris.
[198] OECD (2019), Implementing Online Cash Registers: Benefits, Considerations and Guidance, Organisation for Economic Cooperation and Development, Paris.
[192] OECD (2019), OECD Employment Outlook 2019: The Future of Work, OECD Publishing, Paris, https://doi.org/10.1787/9ee00155-en.
[47] OECD (2019), PISA 2018 Results (Volume II): Where All Students Can Succeed, PISA, OECD Publishing, Paris, https://doi.org/10.1787/b5fd1b8f-en.
[169] OECD (2019), Public Procurement in Germany: Strategic Dimensions for Well-being and Growth, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/1db30826-en.
[136] OECD (2017), Standard for Automatic Exchange of Financial Account Information in Tax Matters, Second Edition, OECD Publishing, Paris, https://doi.org/10.1787/9789264267992-en.
[156] OECD (2016), Financing Democracy: Funding of Political Parties and Election Campaigns and the Risk of Policy Capture, OECD Public Governance Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9789264249455-en.
[133] OECD (2015), Measuring and Monitoring BEPS, Action 11 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://doi.org/10.1787/9789264241343-en.
[204] OECD (2008), Corruption: A Glossary of International Standards in Criminal Law, OECD Publishing, Paris, https://doi.org/10.1787/9789264027411-en.
[199] Ott, K. (2022), “Millionen-Provisionen für Sauter, Nüßlein und Tandler wohl legal”, Sueddeutsche Zeitung.
[28] Panchenko, T. and P. Poutvaara (2022), Intentions to Stay and Employment Prospects of Refugees from Ukraine, ifo Institute.
[24] Rangnitz, J. (2022), Gewinninflation und Inflationsgewinner, Ifo Institut.
[179] Riphahn, R. (2023), “Die deutsche Dateninfrastruktur aus Sicht der empirischen Wirtschaftsforschung”, Wirtschaftsdienst, Vol. 103/1, pp. 24-28.
[108] Sarin, N. and L. Summers (2019), “Shrinking the Tax Gap: Approaches and Revenue Potential”, NBER Working Paper 26475, https://doi.org/10.3386/W26475.
[85] Scheuer, F. and J. Slemrod (2021), “Taxing Our Wealth”, Journal of Economic Perspectives, Vol. 35/1, pp. 207-230, https://doi.org/10.1257/jep.35.1.207.
[9] Schularick, M. (2021), Der entzauberte Staat - Was Deutschland aus der Pandemie lernen muss, Verlag C. H. Beck Muenchen.
[88] Schularick, M., C. Bartels and T. Albers (2022), “Wealth and Its Distribution in Germany, 1895-2018”, CESifo Working Paper, Vol. 9739.
[201] Schuster, F. et al. (2021), The cyclical component of teh debt brake: analysis and a reform proposal, Dezernat Zukunft.
[135] Schwarz, Y. and C. Trautvetter (2021), Nie wieder Cum-Ex Wie die Steuerverwaltung in Deutschland schlagkräftiger und gerechter werden kann, Netzwerk Steuergerechtigkeit.
[43] Smith, D., P. Kowalski and F. van Tongeren (2022), “Modelling trade policy scenarios: Macroeconomic and trade effects of restrictions in cross border labour mobility”, OECD Trade Policy Papers, No. 259, OECD Publishing, Paris, https://doi.org/10.1787/b37fa34f-en.
[25] Sommer, U. (2022), “Für diese 15 Dax-Konzerne wird 2022 trotz aller Krisen ein Rekordjahr”, Handelsblatt.
[166] Sorbe, S. et al. (2019), “Digital Dividend: Policies to Harness the Productivity Potential of Digital Technologies”, OECD Economic Policy Papers, No. 26, OECD Publishing, Paris, https://doi.org/10.1787/273176bc-en.
[127] Spengel, C. (2021), Public Hearing of the Subcommittee on Tax Matters of the European Parliament on the Cum-Ex/Cum-Cum Scandal, European Parliament.
[129] Spengel, C. (2020), “Steuerrechtliche Behandlung von Cum/Cum-Geschäften – Folgerungen aus dem Urteil des Hessischen Finanzgerichts vom 28.1.2020 und Konsequenzen für die Praxis”, Der Betrieb, Vol. 37, pp. 1919-1927.
[126] Spengel, C. (2017), “Kollektivversagen: Cum/Cum, Cum/Ex und Hopp!”, Wirtschaftsdienst, Vol. 97/7, pp. 454-455, https://doi.org/10.1007/s10273-017-2161-y.
[128] Spengel, C. (2016), Sachverständigengutachten fuer den 4. Untersuchungsausschuss der 18. Wahlperiode, Bundestag der Bundesrepublik Deutschland.
[74] Spermann, A. (2013), “How Does Temporary Agency Work Impact German Agency Workers?”, IZA Policy Paper, Vol. 70.
[73] Sperrmann, A. (2022), “Minijobs: Unverzichtbare Flexibilität”, Wirtschaftsdienst, Vol. 102/1.
[101] Stantcheva, S. (2021), “Understanding Tax Policy: How do People Reason?”, The Quarterly Journal of Economics, Vol. 136/4, pp. 2309-2369, https://doi.org/10.1093/qje/qjab033.
[146] Storbeck, O. (2022), German regulator postpones verdict on flaws in EY’s Wirecard audits, Financial Times.
[65] SVR (2019), Den Strukturwandel meistern - Jahresgutachten 2019/2020, Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
[109] Tørsløv, T., L. Wier and G. Zucman (2022), “The Missing Profits of Nations”, Review of Economic Studies.
[143] Transparency International (2021), Geldwaeschebekaempfung in Deutschland, Transparency Internationel e.V.
[150] Transparency International (2021), Global Corruption Barometer - European Union 2021, Transparency International e.V.
[117] Trautvetter, C. (2021), Mehr Steuergerechtigkeit durch eine gestärkte Steuerverwaltung, Netzwerk Steuergerechtigkeit.
[107] Trautvetter, C. (2020), Immobilienmaerkte (be)steuern, Netzwek Steuergerechtigkeit.
[95] Trautvetter, C. and Y. Schwarz (2021), Jahrbuch Steuergerechtigkeit, Netzwerk Steuergerechtigkeit.
[119] Troost, A. (2016), “Nimmt der Länderfinanzausgleich den Anreiz zum Steuervollzug?”, Wirtschaftsdienst, Vol. 96/9, pp. 660-666, https://doi.org/10.1007/s10273-016-2031-z.
[177] Tryggvadottir, Á. (2022), “OECD Best Practices for Spending Reviews”, OECD Journal on Budgeting, Vol. 1.
[193] van Dalen, H. and K. Henkens (2019), “Do stereotypes about older workers change? A panel study on changing attitudes of managers”, International Journal of Manpower, Vol. 41/5, pp. 535-550, https://doi.org/10.1108/ijm-09-2018-0300.
[155] von Salzen, C. (2022), “Neue Regeln für Bundestagsabgeordnete Nebeneinkünfte werdenzum Teil erst 2023 öffentlich”, Der Tagesspiegel.
[60] von Weizsaecker, J. (2022), Ein Transformationsfonds für den Strukturwandel im Saarland, Saarländisches Ministerium der Finanzen und für Wissenschaft.
[71] Walwei, U. (2021), “Geringfügige Beschäftigung: Ausweiten oder Abschaffen?”, Institut fuer Arbeitsmarkt und Berufsforschung - Anhoerung Ausschuss fuer Arbeit und Soziales des Deutschen Bundestages.
[189] Westermeier, C. and M. Wolf (2020), “Betriebe wollten 2018 deutlich mehr rentenberechtigte Mitarbeiter halten als 2015”, https://www.econstor.eu/handle/10419/234206 (accessed on 11 November 2022).
[134] Wier, L. and G. Zucman (2022), “Global profit shifting, 1975–2019”, WIDER Working Paper.
[116] Wier, L. and G. Zucman (2022), “Global profit shifting, 1975–2019”, WIDER working paper.
[203] ZG Überblick (2022), “Schuldenbremse: Schätzmethode des Produktionspotenzials auf dem Prüfstand”, Wirtschaftsdienst, Vol. 102/11, pp. 821-821, https://doi.org/10.1007/s10273-022-3321-2.