FDP on finance and taxes

The FDP wants to use the Bundesrat (the chamber of the states) to make the reduced 7 percent VAT rate on restaurant meals permanent. The rate should also apply to drinks. The platform justifies this with the pandemic's impact on hotels and restaurants.

Restaurants currently pay a lower tax of 7 percent on food. This is set to end at the end of 2022. The FDP wants the lower tax to stay for good. It should also apply to drinks.

The cut to 7 percent is limited until December 31, 2022. The FDP wants to remove this deadline and extend the reduced rate to drinks. Because VAT is federal law, the state would act through the Bundesrat. The platform says hotels and restaurants were hit hard by the pandemic.

The FDP calls for an exemption allowance in the real estate transfer tax for the first purchase of an owner-occupied home. If that does not happen, the tax rate should be lowered across the board. The platform argues that high purchase costs keep middle-class families from buying a home.

People who buy a house pay a tax on the purchase. The FDP wants to waive or reduce this tax for a first home. Otherwise the tax should go down for everyone. This should help more people afford their own home.

The platform points to Schleswig-Holstein's rate of 6.5 percent, which it says is among the highest of all German states. The allowance would apply to every first purchase of an owner-occupied property, regardless of the buyer's age or stage of life. As an alternative, the FDP names a flat reduction of the rate. In its view, more home ownership eases rental markets, supports retirement provision and ties people to the state.

The FDP wants to push at the federal level for residential buildings to be depreciated for tax purposes at three percent a year instead of two. This is meant to allow lower rents in new buildings.

People who build homes can deduct the cost from their taxes bit by bit. Today that is two percent a year. The FDP wants three percent. This should make building cheaper and lower rents.

The higher rate would apply in principle to all housing construction. The platform justifies it by saying new buildings have a shorter average service life because of more technology and higher building and energy standards. The federal government is responsible, so the FDP announces it will press for the change there.

The FDP stands by the debt brake and wants a quick return to balanced budgets. At the same time, a minimum rate of investment is to be written into the state constitution. The platform argues that the two together lead to the right budget priorities.

The FDP wants to keep the debt brake. The debt brake is a rule: the state may take on almost no new debt. At the same time, the state should invest more, for example in roads and buildings. At least 10 percent of the budget should go to investment. This duty should be written into the state constitution.

The investment rate is to stay at 10 percent or more permanently and reach 12.5 percent in the medium term. Repairs to public infrastructure are to continue without cutbacks because, in the FDP's view, neglected investment also burdens future generations. The emergency loans taken out during the pandemic are to be paid back step by step, with the repayment plan secured by law. A review of state tasks is meant to cut lower-priority spending and direct funds to core tasks and areas that generate growth. The FDP wants to limit the burden of taxes and charges to what is essential.

The FDP wants to sell state shareholdings where there is no important state interest or where private firms can do the job just as well and as economically. In addition, the state-owned agency handling the legacy assets of HSH Nordbank is to be wound down quickly to rule out further financial risks.

The state owns shares in companies. The FDP wants to sell such shares when the state does not really need them. Private firms should take over tasks if they can do them just as well. The FDP also wants to close the state's bad bank quickly. A bad bank manages old, risky deals of a bank.

The state budget code is to be changed so that private provision takes priority as soon as it performs equally well as the public option. The hsh portfoliomanagement AöR, which the platform calls the state's "bad bank," is to be wound down swiftly. The state debt held there would be moved into the core budget. The FDP expects this to create full transparency about the state's debt.

The FDP wants Schleswig-Holstein to calculate property tax using a simple area-based model instead of the federal value-based model. It considers the federal model bureaucratic and prone to lawsuits. The reform is not supposed to raise the tax burden.

People pay property tax on land and houses. The FDP wants to base it only on size. The value of the land should not matter. This should be simpler and mean less paperwork. The tax should not go up because of the reform.

The FDP fears that standard land values will not be available in time for every plot and rejects having taxpayers report these values themselves. The cost of collecting the tax should not fall on citizens. To keep the reform from raising the burden, the revenue-neutral local tax rate is to be published for every municipality. Landlords would still be able to pass the tax on to tenants, which the FDP says ensures transparency and keeps the tax from being folded into the base rent.

The FDP wants to amend the municipal charges act so that road improvement charges disappear across the whole state. Through the same law, the first dog in every household is to be exempt from the dog tax.

In some towns, residents must pay when their street is rebuilt. The FDP wants to end these charges everywhere in the state. Also, the first dog in a household should no longer be taxed. The FDP says a dog matters to many people and is not a luxury.

According to the FDP, municipalities are already no longer required to levy road improvement charges; now the charges themselves are to go statewide. On the dog tax, the platform argues that the dog is the only animal whose keeping is taxed as a luxury, even though it is an important companion for many older people and families. In the FDP's view, only fines, not the tax, help reduce fouling in public spaces. It also points out that it prevented a horse tax.

The FDP wants to lower taxes and charges on energy sources and everyday goods. It cites the price increases caused by the pandemic and the war against Ukraine, arguing that the state should not earn extra from crises and price shocks.

Electricity, gas, oil and gasoline have become much more expensive. Food costs more too. The FDP wants to cut taxes on these things. The state should not earn more from high prices than before.

The platform attributes higher prices for food and consumer goods to supply bottlenecks during the pandemic, and the surcharges on electricity, gas, oil and fuel to the attack on Ukraine. According to the FDP, taxes and charges amplify this effect at the expense of households and businesses. In times of crisis, extra government revenue that results purely from higher prices is to be avoided as a rule through temporarily lower tax rates.

The FDP wants a lasting fair split of funds between the state and its municipalities and a prompt overhaul of the municipal fiscal equalization system. Investment funds should go mainly to towns and cities, which according to the platform bear most of the cost of daycare centers, schools and roads.

The state gives money to local governments. The FDP wants to share this money fairly. Money for building should go mostly to towns and cities. They pay for daycare, schools and roads.

The platform bases the demand on the principle of subsidiarity: stronger local self-government is meant to bring the state closer to citizens. Services that a municipality provides for people from other places, and that cannot be financed through cost-covering fees, should count for more in the equalization system. Structural budget problems of individual municipalities should be handled mainly through that system. The FDP wants to continue consolidation aid and deficit grants and keep tying them to the municipalities' own efforts to improve their budgets. Supervisory authorities should also recognize business-attraction policy as a way to raise revenue, since higher local tax rates could drive companies away.

The FDP wants the federal government to permanently give municipalities a larger share of value-added tax revenue. It should also contribute more to costs that its decisions create for the states and municipalities.

Local governments should get more money. The federal government should give up part of its sales tax income for this. It should also pay more when it decides on new tasks. The FDP says: whoever orders must pay.

According to the platform, towns and cities everywhere should be able to maintain and develop their infrastructure. A different split of overall tax revenue is meant to strengthen municipal finances across the board. Mismanagement by individual municipalities must not be rewarded at the expense of others. Through the Bundesrat, the FDP wants a rule modeled on the state-level Konnexität principle (whoever assigns a task pays for it). As examples of lasting burdens, the platform cites the legal right to a nursery place and mandatory all-day schooling.

The FDP calls for a ceiling on the Nivellierungssätze, the standardized rates used to calculate a municipality's tax capacity in fiscal equalization. It aims to prevent a spiral of rising local property and business tax rates and to make designating commercial zones more worthwhile.

The state works out how much tax a town could collect. It uses fixed rates for this. The FDP wants a ceiling on these rates. That way local taxes should not keep going up.

According to the platform, a municipality is assumed to have more revenue than it really has when its local tax multipliers are below the standardized rates. Because tax increases by individual municipalities currently raise the standardized rates automatically, the FDP fears rising rates statewide. Higher standardized rates also raise the levy that towns pay to their county, even though the counties need no more money. Third, a municipality that develops a commercial zone should have an advantage over one that chooses not to.

The FDP wants Hamburg's payments for sediment management to go into a special fund controlled by the state parliament. The money should mainly benefit coastal fishing in the Elbe and the North Sea.

Hamburg pays Schleswig-Holstein money for its harbor silt. The FDP wants to put this money in a separate fund. The state parliament should decide on the fund. The money should mostly help coastal fishers.

Besides coastal fishing, the platform names further uses for the money. These include nature-oriented tourism on the west coast and removing silt from harbor approaches. Environmental education and cooperative nature conservation projects are also to be funded.

The FDP wants to push in the Bundesrat for less tax bureaucracy. Minor taxes that are costly to collect should be abolished, founders and side businesses with low earnings should be exempt from advance VAT returns for two years, and the effects of tax policy should be evaluated.

The FDP wants less paperwork for taxes. Small taxes that take a lot of effort should go. People who start a business should file fewer tax reports for two years. Tax laws should also be checked to see what they really do.

The exemption from advance VAT returns is to apply permanently to the first two years when business earnings are low. The platform cites solar panel systems as an example of a side business. To evaluate tax policy, data held in different places should be combined in anonymized form. The FDP wants to use this to determine effects on bureaucracy, capital flight, growth, business continuation and tax avoidance.

The FDP wants to expand the state's pension reserve fund so that it can cover all pension obligations in the long run. Monthly payments for each new civil servant are to rise step by step, and the fund's assets are to be protected in the state constitution.

The state must pay pensions to its civil servants later. There is a savings fund for this. The FDP wants to pay more money into this fund. The fund should later pay for all pensions. The constitution should protect the money.

According to the platform, 100 euros a month per new civil servant currently go into the fund. This amount is to grow gradually so that true staffing costs show up during the years of active service. The fund would then do more than just cushion the rise in pension spending. A protective clause in the state constitution is meant to secure the assets.