Ifo Survey: German Firms Cite Excessive Tax Burden, Especially on Labor, for 2025

A substantial majority of German companies perceive the nation's fiscal structure as excessively burdensome for 2025, according to a recent survey conducted by the Ifo Institute in Munich. The assessment, which reflects the prevailing sentiment across the corporate sector, highlighted several key areas of fiscal pressure, including labor costs, energy levies, income tax, and the municipal trade tax (Gewerbesteuer). The investigation, commissioned by the Stiftung Familienunternehmen, gathered responses from 1,705 companies to gauge their perspective on the current tax and levy framework.

Taxes and levies associated with the workforce emerged as the most pronounced concern among respondents. Nearly 83% of the surveyed firms classified these labor-related fiscal obligations as a strong or very strong burden. Ifo Institute economists noted that this finding underscores a critical issue for Germany's location factor, as elevated labor costs can potentially diminish international competitiveness across key industrial sectors. Rainer Kirchdörfer, a board member at the Stiftung Familienunternehmen, stated that excessive taxation on labor impedes both employers and employees by eroding the incentive for performance.

The second most frequently cited fiscal strain was the trade tax, identified as a major burden by nearly 72% of the companies surveyed. Following closely, taxes and levies related to energy were reported by 68% of respondents, positioning them as the third most significant perceived fiscal challenge. These figures collectively illustrate a multi-faceted fiscal difficulty that extends beyond direct corporate income taxation to encompass operational expenditures and employee compensation structures.

Against this backdrop of corporate dissatisfaction, companies articulated clear demands for policy adjustments in a related study published by the Stiftung Familienunternehmen in August 2025. Specifically, 90% of the firms called for tax relief on earned income as a primary measure to enhance competitiveness, alongside a stabilization of non-wage labor costs. The German Federal Government (Bundesregierung) is currently addressing these pressures through negotiations on its 2025 budget draft as part of a broader growth initiative, which includes measures like accelerated depreciation options for investments made between June 2025 and January 2028.

Ifo economists have proposed specific policy recommendations to mitigate these identified pressures, including a reduction in income tax within the middle bracket, a decrease in the electricity tax for all companies, and a reduction in the corporate income tax (Körperschaftsteuer) for capital companies. While the planned corporate tax reduction is set to begin phasing in starting in 2028, lowering the rate annually until it reaches 10% by 2032 from the current 15%, competitiveness concerns remain pertinent. In 2024, international corporations announced 17% fewer investment projects in Germany compared to the previous year, marking the lowest figure recorded since 2011.