Craftsmen's bonus will not be abolished

The tax bonus for tradesmen's services has been a success story since 2006. And the federal government intends to maintain the tax deductibility of tradesmen's services.

This article is part of the special topic Tax bonus for tradesmen's invoices: What you should know

Federal Finance Minister Wolfgang Schäuble (CDU) emphasized to the press on Thursday that he saw no need for action regarding tax relief for tradespeople. Vice Chancellor Sigmar Gabriel (SPD) also stated that the tax privilege should not be touched.

"Current statements are premature and unreflective," said ZDH President Wollseifer in response to statements by SPD parliamentary group deputy Carsten Schneider, who would prefer to abolish the craftsmen's bonus. Schneider had told the Süddeutsche Zeitung (April 3, 2014) stated that the goals associated with the tax credit were partially missed. "There is clearly a need for action. The Finance Minister cannot ignore this," Schneider said. He referred to a study commissioned by the federal government that critically examined the tax bonus.

Lena Strothmann, a member of the Bundestag from Bielefeld and spokesperson for craft policy for the CDU/CSU parliamentary group, advised the coalition partner to coordinate better: "I don't agree with the proposal to abolish the tax deductibility of craftsmen's services. Mr. Schneider's proposal is not coordinated with either the CDU/CSU or the SPD. Schäuble and Gabriel unanimously reject the abolition. I therefore urgently advise the SPD to coordinate better internally in the future – also in the interests of successful coalition work."

The tax bonus helps companies through the economic crisis

The skilled trades clearly see the instrument as a success story: Thanks in part to the tax bonus, which has doubled since 2009, businesses have weathered the financial and economic crisis well. "Since then, the tax bonus has contributed significantly to stabilizing German economic performance," says Hans Peter Wollseifer.

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Tax bonus for skilled trades services remains in place

Illegal craft activities have been declining for years

Recent statements by the Federal Ministry of Finance and Prof. Friedrich Schneider of Johannes Kepler University Linz show that the illegal commissioning of tradesmen's services in private households has been declining for years. It is also being forgotten that the Federal Ministry of Finance already addressed the criticisms raised in a new application letter in January 2014.

For example, the legally required activities of chimney sweeps are now only partially deductible, and the services of an expert are no longer tax-privileged as household-related services. In addition, according to the president of the Chamber of Crafts, the scientific approach used in the preparation of the current evaluation report is, to say the least, highly controversial. The conclusions now published are therefore hardly tenable.

Objectify the debate

"The skilled trades sector is keen to make the debate more objective," explains the ZDH president. "The fact is that private households are increasingly using the tax credit instrument. Commissioning legally performed skilled tradesmen's services generates 19 percent in tax revenue for the tax authorities in any case – on the subsidized skilled tradesmen's services as well as on the non-subsidized material costs." In addition, there are the corporate taxes that budget experts often forget, which are increasing – corporate tax, income tax, trade tax; as well as the additional revenue from wage tax and rising social security contributions.

The potential of the craftsman bonus has not yet been exhausted

Rather, it's true that the potential of the tax bonus for tradesmen's services hasn't yet been fully exploited. An expansion to the rate for general household-related services, which allows up to 20 percent of €20.000, i.e., a maximum tax bonus of €4.000, would be desirable. Wollseifer: "Then this instrument could also be used by private households for energy-efficient building renovations, which have not previously been tax-privileged."

Curb undeclared work

The deductibility of tradesmen's services was introduced in 2006 by the then grand coalition to curb undeclared work and promote household-related employment. "In my view, we have achieved these goals, because the tax bonus has been increasingly utilized in recent years, and we can record more household-related employment," says Lena Strothmann (photo), who is also president of the East Westphalia-Lippe Chamber of Skilled Crafts in Bielefeld. "We must also not forget that every legal contract award also generates revenue through value-added tax, corporate tax, and payroll tax."