Major tax reform: Necessary and feasible

The EU eastern enlargement of 1 May 2004 has intensified tax competition considerably because of the lower tax rates of some of the new member states. Under these changed conditions the German tax reform of 2000 will not suffice to preserve the attractiveness of Germany as an investment location in light of the tax-induced capital migration. Major tax reform will be inevitable. This reform should further lower the tax burden on earned income, streamline taxation law, broaden the assessment base by reducing distorting subsidies and limit the tax-induced capital migration to the new EU countries. This article examines various reform proposals on income tax, including the immediate-action program of the CDU and CSU, the reform proposition of Paul Kirchhof, the proposal of Joachim Lang, the second tax reform option of the Council of Economic Experts and the Ifo proposal of Hans-Werner Sinn.