The state earns a lot with: 58.4 percent taxes on performance bonuses in Germany

The state earns a lot with: 58.4 percent taxes on performance bonuses in Germany

According to a report by www.wiwo.de, the German Economic Institute (IW) examined the so-called border tax wedge in order to analyze the burden of taxes and duties on performance bonuses. It was found that in Germany 58.4 percent of additional earnings, such as bonus payments, go to the state. In comparison, the OECD average is around 44 percent.

The high burden of performance bonuses in Germany could potentially have negative effects on the labor market. Due to the high tax and duty burden, companies could be tempted to offer fewer bonuses and performance bonuses in order to save costs. This, in turn, could reduce employee motivation and lead to lower levels of performance in the long term.

Furthermore, the high tax burden on performance bonuses could discourage talented employees from working in Germany, as they could receive higher net pay in other countries. This could lead to a brain drain, with well-qualified workers leaving the country to find better financial conditions.

With regard to international tax competition, the high border tax wedge in Germany could also make the country less attractive for international companies compared to other countries. This could have a negative impact on the competitiveness of the German market and the attraction of foreign investments.

The results of the IW analysis show that the high tax burden on performance bonuses in Germany could potentially have far-reaching effects on the labor market and the country's competitiveness. It remains to be seen whether political measures will be taken to reduce the tax burden and increase the attractiveness of the German market.