Tax breaks for international skilled workers

Germany is facing a significant shortage of skilled workers, with around 700,000 vacancies. To counteract this, the federal government had considered income tax relief for international skilled workers. The plan was to exempt income between €41,000 and €500,000 from income tax at a rate of 30% in the first year, 20% in the second year, and 10% in the third year. The aim was to make Germany more attractive as a place to work for skilled workers from abroad. Many OECD countries have already introduced tax incentives to attract talent. However, these vary greatly and are often aimed only at top earners. Germany hoped that the proposal would improve its competitiveness in the global labor market. According to estimates, the measure would have led to annual tax losses of around €2 billion. Although additional skilled workers could have generated additional revenue in the long term, this would only have partially offset the losses. The advantages include the opportunity to attract more qualified workers. However, critics pointed to social injustice toward taxpayers who did not benefit, international tax competition, and the relatively short duration of the benefits. In addition, other factors often play a greater role in migration decisions than tax incentives. If the scheme had been introduced, the group of beneficiaries would have had to be clearly defined, and possible windfall effects limited by appropriate income limits. The inclusion of Germans living abroad should also have been considered. However, tax losses and acceptance problems could diminish the long-term benefits, such as the recruitment of qualified skilled workers.