The miracle cure for the crisis saves tens of thousands of jobs – but some employees face a nasty surprise with their tax return due to progression.
For many companies and millions of employees in Germany, short-time work is the saving anchor in the corona pandemic. But when it comes to the tax return in the following year, it turns out that some people face a nasty surprise: because although the short-time allowance itself is tax-free, the employees could have to pay back payments.
As the German government announced in response to a request from the left in the German Bundestag, the tax authorities are expecting around 1.6 billion euros for the 2020 tax year due to the so-called progression proviso on short-time work benefits.
This reservation states the following: Taxes should take into account the entire income of a citizen. For this reason, short-time working allowances and other state benefits are added to normal income to determine the tax rate. The originally tax-free short-time work allowance can therefore ensure that the personal tax rate at which the remaining income is taxed increases.
Only when the income tax return is made is a final check of how much tax an employee has to pay for his wages. This is compared with how much tax he has already paid through the wage tax deduction. If less was deducted than required, there may be an additional tax claim.
According to the German Ministry of Finance, it is very difficult to say in general terms in which cases this happens with employees on short-time work. That could be the case, for example, if you have higher additional income or a spouse with a good income. But it also depends on interest income, the scope and length of short-time work and the amount of short-time work allowance. In the same way, however, refunds are also possible, for example if the employer has still deducted the usual, then too high, wage tax despite short-time work. “If almost exclusively tax-free short-time work benefits subject to the progression proviso are received, there is no tax to be assessed,” explained the ministry.
Trade union federation calls for tax brake
Scientists at Stanford University have calculated that a single employee with a gross wage of EUR 4,000 and half short-time work is threatened with back payments after just two months of short-time work. With full short-time work, on the other hand, there is money back from the state.
Left MP Sabine Zimmermann assumes that short-time workers are threatened with additional tax claims of several hundred euros per person. The progression proviso also applies to unemployment benefits. However, the government was unable to provide any information on the associated additional tax revenue.
Zimmermann criticized: “Anyone who receives short-time allowance has already suffered a significant loss of income.” She told the German Press Agency that there is now a risk of additional tax claims. She called for the progression proviso for short-time allowance to be abolished.
Last year it had been discussed for months whether the regulation should at least be suspended for 2020. That this did not happen was justified in the coalition with the justice to other workers.
The German trade union federation called on the federal government to apply a tax brake. “Anyone who has to accept a significant loss of income with the short-time allowance should not also have to struggle with additional tax payments,” said DGB board member Stefan Körzell. “The coalition must finally act now to prevent further hardships for employees on short-time work.”
According to the DGB, there is a risk of unacceptable additional burdens, especially for employees in the low-wage sector who do not receive an increase in the short-time allowance from their employer. This applies, for example, to parts of the catering trade, retail trade, hotel industry but also other rather medium-sized industries.
Between February 1st and 24th alone, the Federal Agency received short-time work notifications for 500,000 people. In December, 2.39 million people were paid short-time work benefits. The peak was reached in April last year with almost 6 million people.
Short-time work should also be at the center of a joint appearance this Friday by the German Labor Minister Hubertus Heil (SPD) and the chairman of the Federal Employment Agency (BfA), Detlef Scheele. Both want to take stock of “One year Corona” in terms of labor market policy. According to Scheele, short-time working secures employment on a large scale and prevents unemployment.
