Herausforderungen für das Steuerrecht durch die demografische Entwicklung in Deutschland - Analyse einer Problemstellung. Endbericht
Demographic challenges for tax legislation in Germany. Final Report
Similarly to many other European countries, Germany has experienced a considerable demographic shift since the 1970s: higher life expectancy and diminishing birth rates, only partly balanced by immigration, have led to an altered population structure with an increasing share of elderly people. In the next decades population aging in Germany will accelerate and also induce a decline of the total population. These de-mographic changes can be expected to have a profound impact on the governmental budget. While changes in public expenditures have been forecasted regularly since 2005,1 the revenue side has received less attention to date. We study the long-term (2015-2060) changes in tax revenues induced by demographic change. We focus on the development of income tax revenues given a shrinking working population, but also consider sales tax revenues, which account for a similarly large share of total tax revenues. Our aim is to quantify possi-ble fiscal effects of demographic change using microsimulation and to identify elements of the income tax code particularly affected by demographic change. The microsimulation models use the results of two interconnected macroeconomic models developed by Prognos. Based on a scenario without any demo-graphic changes, we distinguish three possible paths for the development of the population in Germany.2 We further run three sensitivity analyses to test the robustness of our results with respect to different model assumptions. These concern labor demand, the size of net migration, and the possible absence of tariff adjustments given increasing real incomes. We find the expected demographic changes in all scenarios to have a clear negative impact on both in-come and sales tax revenues. This holds especially true for the more distant future, when the population in Germany will not only be markedly older but also smaller than in 2015. Population aging increases the impact of various deductibility rules on total income tax revenues, in particular the impact of the deducti-bility of old-age and health insurance provisions. The tax code actually enhances the generosity of old-age provision deductions until 2040, whereas the taxable share of old-age pensions increases. Despite the increasing population share of pensioners with fully taxable pensions, the income tax balance of this de-ferred taxation remains negative in the next decades. The impact of the deductibility of exceptional ex-penses such as expenses for caregiving also increases, but remains small overall. Weak labor demand would amplify the negative impact of population aging on tax revenues, while higher immigration would attenuate it. Due to expected increases in real incomes, demographic change does not imply an absolute drop in tax revenues in the next decades. If the tariff were not adjusted at all in the face of increasing real incomes, its progressivity would imply that the increase in tax revenues overcompensates the decrease due to demographic change. Sales tax revenues are even stronger affected by the demographic changes: Not only has a decreased population a smaller aggregate consumption, but also the structure of its consump-tion changes, with a larger share of older people consuming more goods exempted from sales tax.