The traffic light coalition wants to attract skilled workers from abroad with a tax reduction. This is what the recently presented economic package says. But the agreement could already be in jeopardy again.

Is the unity already over again? Only a few days ago, the leaders of the traffic light coalition celebrated their agreement on the budget and a package to strengthen the economy. But criticism was not long in coming.

In addition to complaints about budget cuts, a planned measure to combat the shortage of skilled workers is causing disagreement in the traffic light coalition. The plan provides that foreign skilled workers will be able to exempt 30, 20 and 10 percent of their gross salary from taxes in the first three years. However, there will be lower and upper limits on the salary.

But Federal Labor Minister Hubertus Heil (SPD) is skeptical. “We need to take a closer look at this,” Heil said on Tuesday on Deutschlandfunk. He is “not terribly happy with this traffic light plan because it can lead to misunderstandings.”

Heil told the broadcasters RTL and ntv that the coalition partners – Federal Finance Minister Christian Lindner (FDP) and Federal Economics Minister Robert Habeck (Greens) – were responsible for the planned tax reduction. He also criticized the proposal for being formulated in a “loose” manner. It must be made very clear: “Work in this country must be worth the same.” You can read more about Heil's positions in the discussion here.

FDP budget officer Christoph Meyer, in turn, reacted promptly to the labor minister's statements. “Hubertus Heil's comments do not advance Germany as a business location at all,” he said. Tax incentives for highly qualified workers are now “a building block for solving the labor shortage in half of the EU.”

“Hubertus Heil should make a better effort to get the job boost going – he must finally be the Minister of Labor instead of just the Minister of Social Affairs,” said Meyer. The minister must “stop bad-mouthing individual measures in the economic package in his contributions to the debate.”

There had already been clear criticism from the opposition. The economic policy spokeswoman for the CDU/CSU parliamentary group, Julia Klöckner, spoke on Platform X of “discrimination against nationals”. Read more about this here.

CSU General Secretary Martin Huber added to his criticism in Tuesday's “Bild” newspaper, speaking of a “scandalous preference” for immigrants. “The traffic light coalition divides and offends the hard-working population,” said Huber. “We need tax cuts for everyone in Germany.”

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Julia Klöckner (CDU): There is some harsh criticism of the traffic light plans from the opposition. (Source: IMAGO/dts news agency/imago)

The proposal is “inconsiderate towards local employees,” BSW chairwoman Sahra Wagenknecht told the AFP news agency in Berlin. The AfD criticizes “a xenophobic policy.”

Left-wing politician Susanne Ferschl complained in the “Welt”: “Giving foreign skilled workers preferential treatment in terms of income tax harms solidarity within the workforce and contradicts the principle of equality enshrined in the Basic Law.”

Government spokesman Steffen Hebestreit, however, defended the planned measure. It is about skilled workers, for whom Germany is in close competition with other countries, he told journalists in Berlin. In many other European countries, there are tax incentives and discounts to attract skilled workers to the respective locations.

According to Hebestreit, the tax relief will only be granted within a minimum and a maximum limit of the skilled workers' annual gross income. Details are now being worked out in detail and will be presented before the cabinet decision next week, the government spokesman announced.

Habeck: “Other countries do it too”

Economics Minister Robert Habeck (Greens) also defended the plan and pointed to examples from other countries. He told the television channel Welt that he understood the concerns about fairness. “On the other hand, we know and see everywhere that we need workers. And other countries are doing it too.”

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Economics Minister Robert Habeck sees role models for tax relief in neighboring European countries. (Source: Kay Nietfeld/dpa/dpa-bilder)

Such tax incentives have been an issue in Europe and beyond for many years. In 2018, the German government had already named 15 EU countries in which this applies in a response to a parliamentary question. However, the focus was on executives in companies and other highly qualified and well-paid immigrants. Higher tax rates than in their home country often deter such target groups from moving abroad.


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