Statement EES President Dr Ingo Friedrich

In view of the dramatic deterioration of the situation for the economy, national governments and the EU are called upon to create better framework conditions, including in the area of taxation.

 In the Corona crisis is has now become a matter of survival for tens of thousands of SME existences and of as much fairness in governmental aids as possible. An almost ideal instrument to reach these goals would be the reintroduction of the possibility of a “tax-loss carry-back”, and this already during the current fiscal year, if it can be proved that a loss is to be expected for the current year and such loss can be quantified. While with the currently already practiced tax-loss carry-over the loss of the closed business year can be calculated against the following year, and thus be deducted, a tax-loss carry-back is not possible in every country or, as in Germany, limited in the amount.  

 In light of the current dramatic economic collapses it would now be necessary to broaden the possibility of a tax-loss carry-back. The now expected loss of the current year 2020 could then immediately be calculated against the profit and paid taxes of the year 2019! The consequence would be the immediate refund of the “over-paid” taxes by the tax office.  

 This would lead to the “winners” of the Corona crisis paying more taxes anyway due to progressive taxation, while the losers would gain immediate liquidity for their current loss through the refund of the over-paid taxes of the previous year. This would enable them to avoid bankruptcy. This also would not be payout by watering can, but an individually paid support according to the correct filing of tax returns. It would also not cost the state any additional money, because the reduced tax payment would incur anyway in the following year 2021. But the measure could take effect immediately and not 12 months from now, when it would be too late for thousands of businesses. This demand by the EES was now decided upon in Germany.

 

Those demanding research and development and the resettlement of business in the EU in the wake of the Corona crisis in turn have to ask themselves why many enterprises have turned their backs to Europe in the first place? Most sites in Europe are simply not competitive. It is therefore necessary to improve the framework conditions for companies in the EU. Investments cannot be ordered by the state, even if this is the request of some politicians. Nationalisation or the founding of state-owned enterprises would be the wrong answer.  It is better to set free the powers of the market economy. Only if the market fails may the state intervene.  But there is no market failure, quite the opposite. Not only during the crisis - but in general - the national governments and the EU have the responsibility to create incentives for economic action and investments, for example through the possibility of temporary special depreciations.   

 The creativity of policy must not be limited to just tackling the question of how to best distribute monies broadly, but must be focused on how to specifically improve the chances of future growth and employment and therefore prosperity for all of us in spite of the crisis.

After the Corona-forced lock-down it is now time to push the start button for the economy and crank up the turbocharger.