The Contribution of German Family Businesses to Tax Revenues

Tasks

The project aims at estimating German family businesses’ contribution to tax revenues. Based on balance sheet and profit and loss accounts-data, the project team estimates the income tax revenues generated by German family businesses to assess their economic importance. Calculations are based on the period 2014–2018.

Methods

For the Top 500 German family businesses (ranked by employment), we calculate income tax payments based on the available balance sheet data. For the remaining German family businesses, we estimate income tax payments based on a functional relationship.

Data and other sources

Orbis-, Amadeus- and Hoppenstedt-databases for business balance sheet and profit and loss account-data as well as data from the German Statistical Office on the composition of German tax revenues.

Results

The corporate taxes paid by the 500 family businesses with the highest employment are estimated to average 22 billion euros per year over the observation period 2010 to 2018. Of this amount, approximately twelve billion euros per year are attributable to Germany. All family businesses together paid an average (estimated) of approximately 67 billion euros per year in corporate taxes in Germany between 2010 and 2018. This corresponds to about 48 percent of the total corporate tax revenue in Germany. For a comparison of the tax burden across the various company sizes and legal forms, the implicit tax burden is calculated as the proportion of the total tax payment (domestic and foreign) to the profit before tax. For the TOP 500 family-owned companies, the calculations result in an average implicit tax rate of 28 percent (2010 to 2018), if only the taxes paid on company profits (corporate income tax, trade tax, capital gains tax) are considered. Taking into account the income tax paid by the members of partnerships and the final withholding tax on distributions by corporations, the estimated implicit tax rate increases to 38 percent. Overall, the implicit tax burden of the TOP 500 family businesses is significantly higher than the implicit tax burden of the 27 non-family-controlled DAX companies, which ranges between 24 and 26 percent.