Would You Move to Germany for a Tax Break?
Partial income tax rebate proposed for skilled immigrants
Photo by Metin Ozer on Unsplash
A proposal from German Federal Finance Minister Christian Lindner would allow foreign workers with in-demand skills to get an initial rebate of 30 percent of their income tax if they immigrate to Germany.
Under the plan, the rebate would be gradually reduced over three years (a 20 percent rebate the second year, 10 percent the third) until the worker was on par with the rest of the workforce.
Arguing in favor of the measure, Economy Minister Robert Habeck noted that several other EU countries - including Belgium, Denmark, Finland, France, Ireland, Italy, Luxembourg, Malta, the Netherlands, Austria, Portugal, Sweden, Spain, the UK and Cyprus - already offer similar incentives.
“It’s worth a try, and in the end it’s also good for German companies," Habeck said at a news conference discussing the upcoming 2025 budget proposals.
According to the German Economic Institute, the country currently has a shortage of 573,000 skilled workers, due largely to an aging workforce, with more workers reaching retirement age than there are younger workers to replace them. There are shortages across all sectors, but the most critical shortages appear to be in health care, social services, the skilled trades, and transportation.
Earlier this year, the federal government passed a different set of changes to the country’s Skilled Immigration Act, making it easier for foreign workers to have their educational qualifications recognized in Germany, as well as for workers to begin work, if they have a valid work offer, before their qualifications are officially certified.
The new updates would also lower the salary requirements to qualify for the EU Blue Card, as well as allow work experience and professional skills to be considered even in lieu of a recognized university degree.
Will it be enough?
To gauge whether the changes will be enough to lure the sought after workers, I spoke to Cheryl Howard, the owner of The Berlin Life, a company that offers career coaching and professional development services to immigrants new to Berlin.
Howard, a Canadian who first moved to Berlin to work more than a decade ago, says she has mixed feelings about the plan.
“It is very expensive to move to Germany - especially to a place like Berlin,” she says. “It will be extremely difficult to find an apartment, then you have to have enough money for three months’ [rent] up front for a deposit, plus the rent, plus money to pay for a relocation company to possibly help with visa and residence paperwork, with finding a place to live, translation services, etc.” she notes.
“All of these things just to get established, that native Germans don’t have to do. So, I think this could help people who have the needed skills and experience, but aren’t wealthy enough or have a lot of money in savings already, to consider coming.”
In Berlin, the local transit agency recently announced it would reduce the frequeny or eliminate entirely some bus routes due to a shortage of drivers.
Photo by Zac Cain on Unsplash
That said, a tax rebate would not be at the top of her list of incentives to attract foreign workers.
“I would first work on issues other than that, but I do feel like it’s something that could help,” she says. “But things like streamlining the bureaucracy, digitalizing things, maybe making some of the things like immigration forms available in other languages. Those are things that I think of.”
The government must also do more to address the issue of the rise of the political far-right and their opposition to immigration, first, she believes.
“Not just fighting the AfD, but finding ways to make life better for the people [who are supporting them],” Howard says. “I think people who are considering moving here are afraid. Am I going to come here and just get treated really badly or threatened with deportation? You can pass all the incentives you want, but as long as that [anti-immigration rhetoric] is what they are seeing and hearing, they are not going to want to come.”
Igor Ranc, the publisher of Handpicked Berlin, a weekly newsletter of business news, job listings, and career tips for the German capital, is also a bit skeptical.
“I have never heard of anyone who said they are not emigrating to Germany because of the tax rate,” he says. “It feels like one of the measures that was not thought through and adds a layer of complexity to the already complicated tax system.“
Ranc originally came to Germany to get an MBA and has lived and worked in the country since 2012. Overall, it has been a good experience, and he thinks the government should focus more on reducing the backlog at government offices and supporting workers who want to integrate to be able to easily settle in.
“We could do much more in terms of digitalization, reduction of bureaucracy, and support of relocation programs,” he continues. “There should be more investment in cultural influence to present Germany as what it is: A welcoming country with great opportunities where foreigners will feel welcome. Tax rebates cannot compete with this.”
Concerns about equity
As you might expect, many Germans have expressed misgivings about the plan, with some saying it amounted to discrimination against German citizens.
The proposal also comes at a time when some are questioning the need to recruit foreign workers at all.
Two studies released last year highlighted an ongoing “paradox” in the German economy, millions of unemployed people looking for jobs - yet millions of vacancies that German companies say they cannot fill.
“When look at the 2.5 million unemployed people in Germany and you see all of these vacancies, the question arises as to why they don’t cancel each other out,” Stefan Hardege, an expert in labor markets with the Deutsche Industrie- und Handelskammer (German Chambers of Industry and Commerce), told the news outlet Deutsche Welle last year. “[But] we often see that the qualifications of the unemployed do not match the qualifications that companies are looking for."
Private companies and the government also need to consider strategies to provide opportunities for the domestic workforce, Hardege added, whether it is to offer training programs so that people can get in-demand skills, incentives for older workers to stay in the labor market, or support for families, so that more parents —particularly working mothers— are able to work full-time.
But, even then, current demographic trends point toward Germany continuing to need to bring in skilled workers from abroad, he said.
“Both solutions are needed - more foreign skilled workers and more German employees,” Hardege said. “But even that will probably not be enough in view of the demographic development.”
What do you think? Should Germany offer a tax incentive to lure skilled workers? Will it be effective? Let me know in the comments.
—What’s New?—
Reading
Are you interested in moving to Berlin or to Germany for work? Get the scoop from people who know. Check out these newsletters published by two of the sources for our main article.
The Berlin Life | Cheryl Howard | Substack
Handpicked Berlin | Igor Ranc | Substack
Watching
I’ve found that many standard German language classes leave out a very important element — how to swear. Are you studying German but don’t know any curse words? Do what I did and watch these dash cam compilations, you’ll be swearing like a native speaker in no time. But you may want to rethink getting that Führerschein.
Listening
This Week in Berlin Clubs [week45]
This Week in Berlin Clubs [week45] · Playlist · 109 songs · 292 likes
open.spotify.com/playlist/0Pm6a0fcKFq79nXkObs2zG?si=de225c256bae4a91
That’s it for this week. Everyone stay cool!
-Cathi
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