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New €350 monthly freelancer tax “will kill innovation in Germany”

A new German law will force freelancers to pay a minimum of €350 to prop up the retirement system. Critics say it will kill off the tech start-up scene in Germany. An e-petition has been launched to fight the freelancer tax.

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The German government’s plan to force freelancers to pay a compulsory retirement 'contribution' will kill off entrepreneurship and destroy millions of independent careers. That’s the opinion of Tim Wessels, an IT specialist from Hamburg who has launched a petition against the so-called “Rewarding Life’s Work” law. Freelancers will be forced to pay €350+ a month to support the broken pension system, on top of the €300-€600 they must already pay for health insurance (plus other taxes). Demanding that entrepreneurs fork out at least €650 a month in contributions before they earn a single cent will end innovation in Germany.

Tim Wessels is a 27-year-old computer specialist who set up his own IT support company while in high school. Now his company employs ten people across two cities. It’s exactly the kind of small tech start-up that Germany is so desperate to produce – and the kind of success story that will be impossible to replicate, if the “Rewarding Life’s Work” law comes into effect. Which is why Wessels has launched an official petition to fight the law.

“Politicians always complain that web innovation doesn’t happen in Germany, and more happens in the U.S.,” Wessels said. “They say we need more innovation and we need more people to try their ideas. At the same time such laws are made... it’s really crazy.”

Under the law, which will come effect in 2013, all self employed people will be forced to pay a minimum of €350 a month, starting at the age of 22, and increasing in price with age. The money will go into the German retirement pool, which will be paid out immediately to current retirees. There’s no guarantee that the retirement system – which is already underfunded by yearly €80 billion – will be able to support today’s freelancers when they reach retirement age.

Rather than reform the retirement system, the Merkel government, under the guidance of Minister for Labour and Social Affairs Ursula von der Leyen, wants to put the burden on the self-employed. Von der Leyen believes freelancers are free-riding the system. While contracted employees have their retirement taxes partly paid for by employers, freelancers aren’t obliged to contribute anything to the pension pool, and are thus dragging the system down.

Wessels rejects the idea that freelancers are free-riders. He said the self-employed invest their time and money into making their ideas successful, with the aim of making a profitable company to fund their retirement.

“The vast majority of freelancers do provide for their retirement. But they don’t do it at the beginning of their careers. They build their company first, and if they are successful a few years later, then they provide for their retirement…Nobody wants to rely on social security when you’re old.”

Furthermore, freelancers who are forced out of their independent careers by this law will probably have to turn to social security to make ends meet. “That doesn’t help the state or the social security system.” One possibilty to escape the freelancer tax is to join the Künstlersozialkasse (artists' social fund), but that option has been removed for many by new membership restrictions that make it even harder to join.

Wessels is particularly against the idea of the fee being fixed, and not related to a freelancer’s income. It will come on top of the compulsory fees freelancers must already pay for health insurance, which range from €300 to €600 a month.

There are about three million registered freelancers in Germany who will be affected by the new law. But Wessels, whose company Fair + Friendly GbR offers IT support, is particularly concerned about one group – the tech start-up scene.

“This is a real problem for the whole founders’ scene… Freelancer programmers, web designers, web developers, these people are affected. It’s already difficult for people in Germany to start their own company, and this is a new huge barrier in your way. If I had had this barrier of 400 euro a month, I would not have been able to develop this (company) while being in school, and building it slowly.”

50000 signatures needed in 8 days

To fight the law, Wessels has utilized Germany’s online parliamentary petition system. Introduced in 2005, the e-petition platform allows campaigners to collect supporter’s online signatures. If 50000 sign up by the deadline of May 22, Wessels will be given a day at the Bundestag to present his case directly to lawmakers.

As of today (Monday May 14), almost 11,000 people have signed the e-petition. Only a few days earlier, that number was 2,000. The number more than quadrupled thanks to a huge amount of social media activity over the weekend. Wessels believes it is possible to reach the 50,000 mark, given the rapid increase in attention his petition has received over the past few days.

“Even if we only get 20,000 or something, it will have some impact. Some politicians will see it, the press will maybe cover it. But to really have an impact we need this 50,000.”

All residents of the E.U. who live in Germany are allowed to sign the petition, which requires you to register and provide your name and street address. Those interested in supporting Wessels’ petition should visit the e-petition website

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Update:

The petition has ended on May 22. More than 80,000 (!) people signed up!


Related articles:

Freelancers to pay more in Germany

50,000 freelancers strike back: petition against retirement tax succeeds

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