Local business taxes: replace or reform?

The municipal budgets are in a bad state also due to the strong decline in revenue from local business taxes. Faced with this situation, in March of last year the Federal Government appointed a commission for the reform of municipal budgets that presented proposals for the modernisation and/or replacement of local business taxes, among other things. The commission examined two models, the BDI/VCI model and the so-called municipal model. Prof. Martin Junkernheinrich, University of Trier and a member of this commission, presents these proposals in detail. Klaus Bräunig, BDI, and Alfons Kühn, DIHT, using the BDI/VCI model, argue for the replacement of the local business tax with a local earnings and profit tax. Prof. Albert J. Raedler, Munich, favours the revitalisation of the local business tax. Prof. Lorenz Jarass, Fachhochschule Wiesbaden and also member of the commission, proposes a step-by-step transition from the local business tax to a local company tax.