The German Crowdfunding Network joined a broad coalition of business advocates last month to plead with the German government to not raise taxes on capital gains.
Typically politicians are always in search of revenue (new taxes) to spend on public projects and services. Some with merit, others not so much. Periodically capital gains tax increases inevitably circle back around as a source of “revenue”.
Germany is not immune to this phenomena. What policy makers almost always miss is that increasing capital gains tax impacts the portion of the economy that is most important. Small businesses grow, and thrive, off the backs of investors that shoulder great risk on the hope of an outsized gain. Small business is the engine of economic growth for most countries, Germany included, boosting small business means more jobs for all. SMEs raise money and then they spend it on infrastucture and employees. This multiplier effect is often debated, but clearly a vital part of wealth creation and prosperity. Somehow some politicians seem to miss this fact.
The open letter (embedded below) states that proposed tax increases would damage investment in startups and harm German innovation. In the UK, probably the most evolved investment crowdfunding market, policy makers have taken a different approach. Investors benefit with significant tax subsidies in the form of SEIS and EIS plans that offset a portion of the risk for investors. The UK has evolved into a new startup haven, noted for its business and investor friendly regime. Perhaps German policy makers would benefit by reviewing the UK innovation economy?
Penalizing capital formation for small business is myopic at best. The German Crowdfunding Network along with its like minded organizes should be supported in their quest.
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