German government’s proposal for tax breaks for foreigners causes uproar

The German government is proposing tax breaks for foreigners to address the country’s major labour shortage.

The plan proposes that skilled workers from abroad receive a 10 to 30% tax reduction for their first three years, with specific limitations in place.

The worker shortage is impacting a wide range of industries and professions, including the hotel and restaurant sectors, nursing, and teaching.

Germany is aiming to attract 400,000 skilled workers annually to help fill the gaps in its labour market.

The government has particularly focused on attracting skilled workers from India.

Rohan Shinde, a logistics manager, and his friends from India believe that a decrease in taxes would be appealing.

“Most probably they would try to migrate over here. So this would motivate [them] and, as well, increase the morale to come over here,” Shinde said.

Plan criticised for potentially fueling extremism and division

The government’s proposal has been met with criticism from various sides, including a major union and the leading opposition party, the center-right Christian Democratic Union.

The CDU says that taxes for all workers should be reduced. 

Julia Klöckner of CDU, who sits on the parliamentary economic affairs committee, says the proposal could lead to polarisation in society, dividing domestic and foreign workers, which could feed into extremism.

“The society’s under pressure because of a lot of migration we have got in Germany, and now this would be a mistake, a wrong signal to send to domestic workers, a signal that they pay a lot of taxes, that people coming from outside have to pay 30% less for the same work,” Klöckner said.

Several other European countries offer foreigners tax incentives with a common focus on in-demand jobs. 

Portugal announced in July that it would reintroduce a program to decrease taxes for foreigners working in some sought-after professions, such as professors. 

Sweden gives tax breaks to people with high incomes or those considered experts in their fields and planning on living in the country for a maximum of seven years.

Denmark is also seeking to attract high earners, who, along with researchers, benefit from a tax rate of around 33%, compared to over 50% for citizens.