"Useless" and "impractical": criticism of the new law on employee participation

On Wednesday, the Federal Cabinet approved the draft bill. Criticism from industry representatives is now mounting.

The Federal Cabinet has approved the draft of the Fund Location Act (FoG). This is intended to exempt the management of venture capital funds from VAT in future. The tax-free allowance for employee shareholdings will then double to 720 euros. If employees participate in start-ups, the federal government only wants to tax the profits after ten years or if they change employer. Up to now, benefits from such shareholdings have had to be taxed directly.

"Germany will become more attractive and competitive as a fund location," says Federal Finance Minister Olaf Scholz (SPD). "It is important to me that employees can also participate in the success of companies."

However, the law has been harshly criticized by industry representatives. Christian Miele, President of the German Start-up Association, wrote on Twitter : "Olaf Scholz's proposal will be a complete disaster. Useless. Far removed from practice. Simply unsuitable." The proposals do not go far enough for him. Bitkom President Achim Berg also criticizes the new law. "Too few start-ups will benefit from this, too many tax risks remain for employees and the tax allowances are clearly too low and subject to too many restrictions," he writes in a press release. Just like Miele, Berg also criticizes the low tax allowance. "If we want to survive in international competition, we need a tax-free allowance of at least 5,000 euros," writes Berg.

The CDU/CSU announced that it would tighten up in the Bundestag. "Consultations with those affected suggest that the draft bill does not go far enough," writes Antje Tillmann (CDU), financial policy spokesperson for the CDU/CSU parliamentary group. "In the parliamentary process, we will work to ensure that Germany can compete with other locations in terms of regulation." The law will next be debated in the Bundestag.