German economists debate VAT increases and wealth tax reforms

Economic experts in Germany are debating potential tax reforms to address fiscal challenges. Moritz Schularick, President of the Kiel Institute for the World Economy, has proposed a significant three-percentage-point increase in Value Added Tax (VAT). He suggests using the resulting revenue to fund tax relief in other areas and to reduce social security contributions, which he argues would make labor more affordable for companies and stimulate economic growth.

In contrast, the Ifo Institute has issued a warning regarding the German government's plans to increase taxes on the wealthy and raise the contribution assessment ceiling for statutory health insurance. Andreas Peichl, head of the Ifo Center for Financial Science, warns that these measures could lead to multi-billion euro revenue losses. He argues that higher tax burdens on high earners may lead to reduced working hours or increased efforts to minimize tax liability through deductions. Peichl suggests that instead of raising taxes on individuals, the government should focus on reducing the number of tax deduction exceptions to increase state revenue.