Resource wastage - Dax-Companies profit from Billion-dollar tax revenues
Germany's largest stock market companies have recorded triple-digit billion-euro profits in recent years while also receiving high state subsidies. At least 10.7 billion Euros flowed to the 40 Dax-companies in 2023 – almost double the amount from the previous year with 6 billion. According to an analysis by Flossbach von Storch Research Institute, a think tank of the same name Cologne asset manager with over 70 billion Euros in managed customer funds.
While subsidies were around 2 billion Euros per year until 2018, they increased significantly in the following years. In total, around 35 billion Euros in state funds went to the largest stock market companies from 2016 to 2023.
"The extent to which profitable companies are supplied with public funds has drastically increased over the past years," wrote analyst Philipp Immenkötter. The total amount is conservatively estimated, as companies have room to label subsidies differently in their financial reports. The numbers are notable, as the Federal Government is simultaneously pushing for budget savings.
For the study, data from the Dax-companies in their financial reports were evaluated. In the autumn of 2021, the number of Dax members increased from 30 to 40 as part of a reform, so the current 40 Dax members were traced back to 2016 to avoid distortions.
Eon and Volkswagen receive the most
There are arguments for subsidies, writes Immenkötter. They can support companies and save jobs in crises like the Corona-Pandemic. However, the question arises, "whether there is an economic necessity to support or promote the Dax-companies to this extent with tax money." According to the study, the net profit of the Dax-companies amounted to 117 billion Euros in 2023.
The energy company Eon received the most subsidies with over 9.3 billion Euros since 2016. Most of it went towards the electricity price brake law and the natural gas heating price brake law, replacing customer payments or reducing purchase prices. Additionally, Eon reportedly received various state investment subsidies.
Volkswagen followed with 6.4 billion Euros. The carmaker received, among other things, tax incentives and research funding for drive and digital technology. BMW ranked third with 2.3 billion Euros, including subsidies for building locations.
Crises and climate change drive subsidies for Dax-companies
Eleven of the Dax-companies received more than one billion Euros in subsidies from 2016 to 2023, it was stated. The median (average) was around 200 million Euros. Indirect subsidies, such as the environmental bonus for private households when buying electric cars, were not included in the study – they are an indirect subsidy for the automotive industry.
The main reason for the increase in subsidies was the decisions of the traffic light government and the Grand Coalition, wrote Immenkötter. This included the plan to transform the economy and support it during the Corona-Pandemic and the Ukraine-War. The funds came from the Climate and Transformation Fund and the Economic Stabilization Fund.
Is the economy becoming dependent on state money?
It is to be expected, however, that a large part of the funds will be replaced by private money. Furthermore, subsidies led corporations to invest in business fields, where it was unclear whether they would be profitable in the long term. "Possible consequences of subsidy politics are resource waste, distortion of competition, and an economy's dependence on state funds."
The Federal government is distributing significant tax fees to Dax-companies, with at least 10.7 billion Euros given in 2023, a staggering increase from the previous year's 6 billion. This large-scale financial support is raising questions about the need for such subsidies, especially considering that Dax-companies collectively reported a net profit of 117 billion Euros in 2023, a billion-dollar win for these prominent businesses.
