Lose the Struggle, Not the Cash: Ingolstadt's Survival Tactic Amidst Soaring Trade Taxes
A local business from Ingolstadt asks for a moderate adjustment in the corporate tax rate.
News Flash - In Upper Bavaria, a record-breaking number of municipalities have ratcheted up their trade tax rates, including 55 communities from the region, according to a recent analysis by IHK Munich and Upper Bavaria. Amidst this financial crunch, Ingolstadt stands as a beacon of stability – refusing to join the trend of raising trade tax rates and opting to maintain its rate of 400 percent. Franz Schabmüller, chair of Ingolstadt's IHK regional committee, lauds this decision as essential in providing a lifeline to local businesses in these tough times.
While the city grapples with mounting financial pressures, Schabmüller advocates for restraint in increasing taxes, fearing that the economics of the city could be tipped over the edge. "We're faced with deep financial difficulties, but plundering our businesses to plug budget holes isn't the answer," he warns. "Businesses starve for long-term reliability in trade tax rates, and Ingolstadt's already among the top in Upper Bavaria. We simply can't afford higher taxes, or local businesses will bail and seek out friendlier climes," says Schabmüller.
With a trade tax rate of 400%, Ingolstadt hovers above the Upper Bavarian average of 342%. Nationally, municipalities are required to institute a minimum trade tax rate of 200%, a figure that the new federal government plans to hike to 280% according to the coalition agreement.
Schabmüller asserts that any increase in taxes would be premature, given the economic slump affecting the local economy and the negligible investment readiness. "Our economy is coughing and wheezing, and it's drowning in taxes, energy, labor costs, and a tsunami of red tape. If Upper Bavaria were to push up trade tax rates now, it would suffocate our local economy even further," he says. The regional committee chairman implores: "We need to give young companies, startups, and existing businesses a boost, not add more headwinds through higher taxes – or they'll abandon us for greener pastures."
In 2024, Ingolstadt raked in around €112 million in trade tax revenue, a decrease of approximately €77 million from 2023 due to economic downturn and structural changes. After accounting for the trade tax solidarity surcharge, Ingolstadt's net trade tax revenue comprised 37% of its total tax revenue that year.
Updates on trade tax rates and municipal finances are made available regularly by the Bavarian State Office for Statistics. The numbers suggest that while Ingolstadt remains steady, the situation across Upper Bavaria remains fluid and needs careful monitoring.
While specific data on trade tax rate changes in Upper Bavaria and their implications are scarce, we can examine their possible effects on Ingolstadt's businesses:
- Fat Fingers in the Cash Box: Higher trade tax rates would translate to increased operational costs for businesses, impacting their profit margins and forcing them to seek alternative cost-cutting measures or move operations elsewhere.
- Golden Carrot: If funds are allocated effectively to upgrade local infrastructure and bolster services, the events could benefit businesses by creating a robust and competitive environment.
- The Economy: A Struggling Giant The broader economic context, challenged by slumping exports and stiff competition from international trade policies, could also weigh heavily on businesses in the region. Nevertheless, Germany's economy is projected to recover gradually from 2026 onwards.
As we await more details on potential trade tax rate hikes, it remains crucial to keep a close watch on how these changes might affect Ingolstadt's local businesses. The future depends on strategic investments in infrastructure and targeted strategies to grow the regional economy.
Financing and business are at the forefront in Ingolstadt as they navigate the economic challenges posed by soaring trade taxes. Despite an increase in trade tax rates in many Upper Bavarian municipalities, Ingolstadt maintains its competitive edge by keeping its trade tax rate at 400%, offering a level of financial stability that local businesses need in these tough times.
