German Election 2021 From an Investor’s Perspective

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An overview of the German Election 2021 from an Investor’s point of view.

The German Election is here. In the month of September, Germany will elect its 20th Bundestag. This is the dawn of a new era for citizens and expats in Deutschland likewise. Similarly for Investors, the new election has a lot of changes in store. In this article, we take a look at the party manifestos from the perspective of an investor.

We have already written a detailed article about how stocks are taxed in Germany. The 2021 elections are going to play a major role in how income, wealth AND stocks are taxed for the next 4 years.

This article is a summarized version of what you will find in Markus Schmidt-Ott’s piece on Finanzfluss. For a full version of the article, click here.

If you want to skip to a specific party, you can use the table above to do that.

How does the German Election affect Investors

As the election date gets nearer, political parties have intensified their campaigning methods. In fact, the 6 major Parties currently represented in the Bundestag have formulated their positions on Manifestos. In this article we take a look at every party’s stance in matters directly related to the interests of an investor in Germany. For example Taxes, Properties, Pensions and so on.

1. CDU/CSU – The Union Parties

Firstly the Union parties that have been in charge for 16 Years now. In fact it is quite visible on their manifesto that they have been incharge for so long. Because there is no strong emphasis of any big changes upcoming.

German Election Manifesto of CDU/CSU

  • No announcement of a tax cut or tax increase. On the other hand, not ruled out such measuers. However, it is mentioned that tax increase is not the right way forward
  • Good news for Small Investors! The Union plans to increase the Saver Lump Sum from 801 Euros per person. Until now, income from capital assets of up to 801 Euros can be exempt from tax with an exemption order. This is set to be increased, but no clarity on the new amount. Afterall, this decision was long overdue as the amount has remained the same since 2009.
  • Another piece of good news for investors is that capital gains should be tax-free after a minimum holding period.
  • Small investors should watch out for the planned introduction of a financial transaction tax. The Union advocates such a tax at European level, but promises that this must not burden both small investors and private retirement provision.
  • There is a clear rejection of Wealth Tax.
  • The CDU/CSU are planning an allowance of € 250,000 per adult and € 100,000 per child for Qwner-occupied properties. This means that a family with two children would therefore not have to pay property taxes upto an impressive € 700,000.
  • Suggestions of a fully State funded Pension. A new pension model moving away from Riester and Rürup pensions,and towards to the 401k model in the USA.

2. SPD – The Social Democratic Party of Germany

SPD presented a manifesto with a futuristic statement. “Out of Respect for your Future” reads the Manifesto, with a clear emphasis on combating inequality and fighting climate change. SPD aims to move away from GDP oreinted growth, and look for societal prosperity instead.

German Election Manifesto of SPD

  • Clear plans to lower taxes for small income groups, and increase taxes on higher income groups
  • Introduction of a 1% Wealth Tax
  • Similar to the Union Parties, SDP plans for a Financial Transaction tax within Europe
  • Good news for tenants, bad news for property owners – SPD is planning a rent moratorium in tense residential areas, which will only allow rent increases within the framework of the inflation rate
  • SPD is pursuing the goal of protecting more employees with company pension schemes, similar to the ‘Swedish Model’

3. AFD – The Alternative for Germany

A clear Right-wing, populist ideology set by the motto of AFD itself – “Back to the future”. AFD strongly demands to leave the Euro zone and return to the Deutsche Mark. AFD brands their plan as ‘Germany, but normal’. AFD’s manifesto does not throw light on new programmes, rather deleting existing ones.

  • Plans to abolish all taxes, except Income tax and Sales tax
  • Automatic adjustment of tax exemption and tax rate to the price development
  • Abolition of the real estate transfer tax for Germans and people residing in Germany
  • Rejection of the rent cap and rent brake
  • Reintroduction of Deutsche Mark
  • No reforms for Pension schemes

4. FDP – Free Democratic Party

By far the most Investor-friendly manifesto. FDP aims to give Germany a fresh start, offsetting a digital age. “There was never more to do” is the title of the election manifesto. Although, it has to be noted that voting decision is not always based on investment friendly reforms.

German Election Manifesto of FDP

  • Plans to introduce progressive taxation, reducing the burden on middle class
  • Top tax rate from a gross income of € 90,000 instead of the previous amount still at € 55,000
  • Similar to Union Parties, FDP plans to increase saver Lumpsum
  • Rejection of a wealth tax and solidarity surcharge
  • Good news for investors! Cryptocurrencies are welcomed. However, they need a legal framework
  • Tax exemption from real estate transfer tax of € 500,000
  • Pension and Retirement schemes are in need of reform. Accordingly modelled after Sweden and USA

5. Die Linke – The Left

Similar to the FDP, Die Linke’s manifesto has a lot to grab the attentions of investors. On the contrary, it is not a positive for investors. In fact, there is no mention of an investsor friendly electoral programme. Die Linke instead entitles “For Social Security, Peace and Climate Justice”.

  • Firstly, there are plans to introduce of a wealthy tax of 45% from € 274,613 gross income and 75% from € 1 million gross income
  • Subsequently, taxation of investment income at the personal income tax rate instead of the investment income tax of 25%
  • One-time corona asset tax of 10% to 30% from assets of 2 million Euros
  • Adjacent to its counterparts, Die Linke plans to introduce a Financial Transaction tax
  • Introduction of a rent cap with a maximum rent increase of 2% per year
  • Joint right of first refusal for tenants when selling the house in which they live
  • Increase in the state pension level to 53%
  • Lowering the retirement age to 65 years
  • Finally, outright rejection of a funded pension

6. Bündnis 90 / Die Grünen – The Greens

The Greens, an optimistic environment-friendly political party have put out a manifesto that wants to make Germany more modern, more digital and more environmentally friendly. The program offers a number of pitfalls, especially for investors.

  • Increase in the basic allowanceIncrease and modification of the top tax rate to 45% from € 100,000 gross income and 48% from € 250,000
  • Taxation of investment income at the personal income tax rate instead of the investment income tax of 25%
  • Wealth tax of 1% on assets of € 2 million or more
  • Introduction of a financial transaction tax at EU levelAbolition of tax exemption after one year for private capital gains (crypto currencies, gold, art, etc.)
  • Taxation of Germans living abroad
  • Replacement of the Riester and Rürup pensions with a capital-covered public citizens’ fund
  • Commission-based investment advice is to be replaced by fee advice based on a state-set fee structure
  • Opportunities and risks of cryptocurrencies and blockchain technologies should be weighed up
  • Rent ceilings in existing buildings should be made possible and rent increases limited to 2.5%

In Conclusion

On the whole, it is quite possible to divide the manifestos of these parties into two groups. There is a clear distinction between SDP, Die Linke, The Greens and the Union, FDP, AFD (to some extent).

The SPD, the Left and the Greens, tends to view investors as a part of the “wealthy” category. It is misunderstood that one does not necessarily have to be rich to invest money. There are of course different views between the left and the right on the role of the state and that of private wealth, each of which is legitimate. It is noticeable that all parties except the Left and AfD can be enthusiastic about a funded old-age provision in different ways.

Finally coming to the concept of Cryptocurrencies, all parties seem to be in agreement that they view this with great skepticism. Only the FDP welcomes, as it puts considers Crypto as “alternative means of exchange”. On the other hand, the Greens want to sound out the advantages and disadvantages before taking a stance.

This overview of the political manifesto is not from a neutral perspective, as we focus from the lens of an investor in Germany. Of course, political decisions cannot purely be taken on investment related policies. But if you are a concerned person whose investment plans are set to be affected by the elections, this article probably allowed you to lean back and glance through the important information!

 If you are an expat in Germany it is absolutely necessary that you manage your finances right. FinanceGermany is here for your help! Check out the website and be on the look out for more finance related content.

1 thought on “German Election 2021 From an Investor’s Perspective”

  1. Sherwyn Anthony Dsouza

    Very nice Analysis. I believe that financial Transaction Tax will be inevitable. It will be interesting to See how Crypto currency develops.

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