German Finance Minister Christian Lindner (FDP) has proposed that international workers receive a tax break for the first three years after they arrive in the federal republic.

Lindner suggests three-year tax refund for foreign workers

Under Lindner’s proposed plan, international workers who come to Germany would benefit from a rebate on 30 percent of their salary before tax (Bruttoeinkommen) during their first year of employment. In the second year, the rebate would be 20 percent and in the third year, 10 percent.

However, the new rules would only benefit workers within a particular income bracket, and this bracket is yet to be determined. If the policy were approved, the applied income brackets and tax refund amounts would be re-assessed in five years.

As one of the new policies included in the government’s 2025 budget, Lindner’s proposal has not been approved. Ministers are expected to approve the complete budget plan on July 17.

Will the tax refund help remedy Germany’s worker shortage?

Along with the Chancenkarte and relaxing working visa rules for non-EU students, Lindner’s proposal is one of several new policies which Germany is adopting to tempt more internationals to move for work or stay after their studies.

Amid a record-high worker shortage, Federal Employment Agency director Andrea Nahles has stressed that “Even if [Germany] leverage[d] all domestic potential, [tackling the worker shortage] will not be possible without further immigration, also for demographic reasons. We need both labourers and skilled workers.”

Now, Germany is looking to enticement strategies from neighbouring countries, such as the 30 percent ruling in the Netherlands and a similar policy in Austria. “It’s worth a try, and in the end, it’s also good for German companies," Economy Minister Robert Habeck (Greens) said to the dpa.

While coalition leaders Scholz, Lindner and Habeck agree that the rebate should be trialled, criticism has come from the opposition. The CDU, The Left and AfD are all opposed to the policy, with CDU representative Julia Klöckner arguing that the rebate amounted to “discrimination against [German] nationals”.

Criticism has come from other angles too, with the head of the German Trade Union Confederation (DGB) arguing that the government should instead focus on improving childcare and healthcare services to attract foreign workers. 

Thumb image credit: sirtravelalot / Shutterstock.com