The Bundestag’s research service is questioning the legality of the tax deduction for foreign skilled workers. According to the committee, a strict legal interpretation would prevent employees who work for an extended period in Germany from benefiting from these tax incentives, which contradicts principles of justice. As stated in the Desert Alliance report published by the German News Agency, the legal provision may have initially been appropriate and necessary to attract skilled labor, but it is no longer suitable for the current context.
Meanwhile, the report did not rule out the possibility of enforcing the decision. Experts suggest that the legislature could utilize the considerable discretion the Federal Constitutional Court has provided to grant tax exemptions. The report stated that if more generous evaluation criteria were applied, “unequal tax treatment could be justified,” as long as the inequality had an objective reason.
The plans to offer tax incentives to foreign workers are intended to make Germany an attractive country for foreign skilled labor. Under the federal government’s plans, skilled migrant workers will be entitled to a percentage of wages from 30% to 10% tax-free in the first three years of employment, which applies to both the minimum and maximum wages.
The Bundestag Research Service argues that there are several reasons to apply a strict criterion for tax incentives. This is because taxes are no longer solely based on financial performance, and taxpayers cannot influence their eligibility for tax deductions.
The report, commissioned by Sahra Wagenknecht of the Alliance-Reason and Justice party, stated that the government’s decision to grant tax incentives to skilled foreign workers involves “tax discrimination against citizens” and contains “social explosives.” It accused the government of being insensitive to the public sentiment in the country.
The federal government argues that the German labor market is in desperate need of skilled workers, and many European countries offer tax incentives to attract foreign skilled workers.
In line with this, the Foreign Ministry has issued over 80,000 visas for foreign workers to work in Germany since the beginning of the year. Out of these, half are for skilled workers. According to the German news agency, there were 73,000 visas issued during the same period in 2023. Last year, the Foreign Ministry issued 78,000 visas for skilled workers in Germany.
