Annex. Progress in structural reforms

Micro- and macroprudential regulation should address remaining risks emanating from the Landesbanken. Continue restructuring the Landesbanken, including through privatisation, consolidation or focusing on core activities according to a viable business model.

One Landesbank is being privatised, as required by the EU Commission under state aid rules.

Improve corporate governance in the Landesbanken and savings banks, for example, by requiring members of the board to be more independent from elected regional and local governments.

No action taken.

Consider ways to improve the effectiveness of requirements to separate investment banking activities from retail banking. For example, give consideration to including securities held for market-making purposes in separation requirements and to focusing such requirements on derivatives exposures.

No action taken.

Strengthen public investment in childcare, early childhood education (ECEC) and primary education. Invest more in full-day schooling,

The federal government has launched an investment program until 2020 that supports expansion of childcare services. It also supports the operating costs of childcare services borne by Länder. Also, measures have been taken to improve access to ECEC and quality of ECEC such as the qualification of child minders.

Provide more support for good municipal investment projects, including by strengthening administrative capacity, especially in municipalities burdened with high spending mandates (such as cash transfers).

In 2017, the federal government increased funding for school infrastructure. It also grants financial relief to municipalities with high federally-mandated social benefit spending.

Improve priority setting in budgeting, for example by enhancing the analytical capacity of parliament and by making poor performance of budget programmes public.

The federal government introduced yearly rolling spending reviews on selective narrowly-defined policy fields in order to improve expenditure prioritisation. Some performance information is included in the budget review.

Introduce regional advisory units in all Länder to provide technical support for local governments in carrying out investment.

The federal government has launched a service to provide organisational and technical support and it has supported more than 100 projects.

Promote e-procurement by improving skills of procurement officials. Involve the public more effectively in investment projects through electronic communication tools.

Since 2016 all federal administration authorities have to publish notices and provide procurement documents online and accept submission of electronic bids. The government is promoting awareness on the training of procurement officials at all levels of public administration.

Improve assessment and disclosure of long-term financial risks of public-private partnerships (PPPs) of subnational governments. Share experience across levels of government and national borders and harmonise procedures.

A special working group was launched in 2017 to improve transparency of PPP projects including their financial risks, chaired by the Federal Ministry of Finance and involving federal line ministries, Länder and other local authorities.

Re-allocate administration of the collection of taxes which accrue to the federal government or are shared between the different layers of government from the Länder to the federal government.

No action taken.

Consider introducing usage-dependent and congestion-dependent road tolls for cars.

The infrastructure charge for the use of federal trunk roads is expected to be collected from 2019.

Include private insurers in the financing system based on the central health fund.

No action taken.

Phase out reduced VAT tax rates.

No action taken.

Reduce social security contributions, notably for low income workers.

The contribution rate to the statutory pension insurance was reduced slightly in 2018.

Cut statutory corporate tax rates. Consider lowering or abolishing the local trade tax.

No action taken.

Update real estate tax valuations while protecting low income households.

No action taken.

Extend capital gains taxes on residential real estate except for owner-occupied housing.

No action taken.

Raise the tax rates applying to household capital income towards marginal income tax rates applying to other household income.

No action taken.

Equalise the inheritance tax burden for different forms of wealth. Remove exemptions for family businesses.

No action taken.

Broaden the contribution base for the funding of health and long term care beyond wage income to all household income.

Since 2015, the transfer from the federal government budget to public health insurance has been increased somewhat.

Index the legal pension age to life expectancy.

No action taken.

Raise the pension premium for starting to draw old-age pensions later in life.

Do not reduce pensions for old-age pensioners who work.

Allow working old-age pensioners to accrue benefits on social security contributions employers pay on their behalf.

The pension premium remains unchanged.

Since 2017, a partial pension and wage earnings can be combined in a more flexible and individual way. Labour market earnings now reduce pensions by 40% only above a threshold of EUR 6 300 annually (previously the threshold was EUR 450 per month). Since 2017, individuals who continue to work after the statutory retirement age can choose to pay pension contributions and thereby accrue full benefits on all their pension contributions.

Focus additional pension entitlements on reducing future old age poverty risks, for example, by phasing out subsistence benefit entitlements more slowly as public pension entitlements rise. Fund such additional spending from general tax revenue instead of higher payroll taxes.

A lump-sum allowance for private old-age provision was introduced in subsistence benefits in January 2018. The additional income within the threshold will not be deducted from the benefits.

Strengthen insurance against disability, for example by making it easier to claim legitimate private disability insurance benefits. Consider eliminating the discount from public disability benefits for claiming the benefit before the age of 63 years and ten months. Reconsider the cuts of these benefits as other income rises.

Legislation in 2017 improved the benefits in case of reduced earnings capacity in the statutory pension insurance.. A more flexible combination of partial pension and supplementary earnings also applies for disability benefits.

Remove barriers to the portability of civil servant pensions.

No action taken.

Enrol all individuals in occupational pensions by default, allowing them to opt out.

As of 1st January 2018, social partners can establish enrolment by default in firms covered by collective bargaining.

Strengthen supervision of direct pension commitments of employers. Make contributions to the risk-pooling scheme dependent on risk indicators.

No action taken.

Reduce operating costs of subsidised, individual pension plans by improving comparability among providers.

Since 2017, providers of subsidised individual pension plans are obliged to disclose the operating costs and how much it reduces yield.

Promote workplace health by improving monitoring and the collaboration between authorities and employers.

No action taken.

Strengthen enforcement of workplace regulation for workers on non-standard contracts.

No action taken.

Strengthen experience-rating in employer contributions to work accident and disability insurance.

No action taken.

Encourage healthy life-styles by raising taxes on alcohol and tobacco and reviewing regulation.

The EU directive on advertising of tobacco has been implemented. The minimum tax rate on cigarettes was increased in 2016.

Lower the tax burden on the second earner in personal income taxation for example by introducing a separate tax-free allowance for second earners.

Relate health insurance premiums to the number of adults in a household.

No action taken.

Continue to expand formal childcare provision, notably for full-day care. Consider introducing a voucher system for childcare. Lower regulations for the set-up of childcare facilities to encourage more private supply.

A new investment program for expanding and improving childcare worth EUR 1.1 billion was launched in 2017.

Reduce the gap in employment protection between permanent and temporary workers by moving towards a unified job contract with the degree of protection rising with tenure.

Ease employment protection legislation for regular job contracts by shortening the notification procedure, by reducing the notice period for workers with long tenure and, in case of dismissals for economic reasons, by giving employers the right to choose between a severance payment or paying a higher unfair dismissal compensation which would replace the court route.

Limit the use of multiple successive fixed term contracts with the same employee.

Since 2017, the duration of employment on jobs filled by temporary work agency workers is limited to 18 months.

Target the preferential tax treatment of minijobs towards low-wage workers.

No action taken.

Continue to review in-work benefits (means-tested benefits which low-pay workers may be able to receive in employment) to ensure that the most vulnerable receive sufficient support while minimising disincentives to work. For instance, phase out more slowly means-tested subsistence benefits for particularly vulnerable individuals earning more than EUR 100. Phase out additional child benefits paid to parents receiving a housing allowance more slowly.

No action taken.

Ease labour market testing requirements for asylum seekers who are judged likely to stay and include them in active labour market programmes.

Labour market tests have been suspended for asylum seekers since 2016.

Since 2016, refugees with good prospects of staying can participate in a job opportunity programme financed by the Federal Government. They also have access to preparatory courses for on-the-job vocational training after three months of staying in Germany.

Improve access of immigrants to public sector jobs.

No action taken

Improve training and the recognition of immigrants’ skills.

Monitoring through common statistics across the Länder is in preparation and will be available in the course of 2018.

Between 2012 and 2016, the government received 86.000 applications filed according to the Federal Recognition Act. Most of the applicants received full recognition. Others were offered trainings by several organisations. Furthermore, the Federal Employment Agency provides qualification programmes and counselling (see above).

A new program was launched in 2016 to lower the costs of application for skills recognition for low income immigrants.

Programs aimed at the integration of asylum seekers into the labour market are in place. They include German classes, (re)-enrolling in school, and counselling services.

Decide quickly who will be allowed to stay and reunite families quickly, especially those with young children.

No action taken.

Integrate migrant children in mainstream schooling while providing specific language support.

Provide financial incentives and advice to parents to encourage refugees to make use of childcare and early childhood education.

Children without any knowledge of German are usually first taught German in preparatory courses. At the same time, they also attend some regular classes to prepare the transition into the regular system. Some Länder boosted language support to accelerate integration.

Access to school education is guaranteed for all children of asylum seekers.

The funding for the migration counselling service for adult immigrants (Migrationsberatung für erwachsene Zuwanderer) was updated in 2016.

Take stock of all available integration measures and evaluate their effectiveness.

The review of the government strategy for German courses and integration of refugees was published in 2017.

Consider establishing an institution tasked with designing, assessing and coordinating labour migration policy.

No action taken.

Liberalise the issuance of SIM cards in mobile communication. Sell the remaining government shares of Deutsche Telekom.

Since 2016, the use of foreign International Mobile Subscriber Identities (IMSIs) in Germany and the use of German IMSIs abroad are allowed for Machine-to-Machine (M2M) communication.

Raise competition in the railway sector, for example by fully privatising the transport service subsidiaries while retaining state ownership of the tracks, and by eliminating exemptions from tendering of regional railway services.

Facilitate access of market entrants to rolling stock.

Strengthen the role of the regulator by improving its investigative and interventional competences. Move to full ex ante regulation of access conditions.

The investigative and interventional competences of the regulator will be strengthened by transposing the 4th EU railway package into national law.

Provide equal treatment in value added taxation for all postal service providers.

Sell the remaining government shares of Deutsche Post.

No action taken.

Ease requirements to hold a tertiary level vocational degree or alternatively to have job experience in a leading position, for self-employment in some crafts.

No action taken.

Scrutinise compulsory membership and chamber self-regulation in the professional services and crafts chambers for entry barriers and lower entry requirements where possible.

No action taken.

Abandon price regulation in some professional services. Abolish the price regulation for architects and engineers and consider liberalising price regulation for notaries. Give lawyers more options to deviate from the principle of effort-based remuneration, e.g. allow all-inclusive fees for certain tasks and extend outcome-based payments.

No action taken.

Reduce exclusive rights in the professional services. For example, allow new companies to register in the commercial registry without notary services and open the provision of auxiliary services in property conveyancing to other professions. Reduce exclusive rights of lawyers in providing legal advice and representation in court.

No action taken.

Review restrictions on business conduct in the professional services. Abolish all remaining restrictions on advertising for lawyers. Give consideration to abolishing restrictions on shareholders for limited liability companies of lawyers, tax consultants, architects and engineers.

No action taken.

Relax the requirement that pharmacies can only be owned by a pharmacist who has to work personally in one out of a maximum of four branches he/she is allowed to own.

No action taken.

Strengthen the analysis of the economy-wide impact of regulation. Establish an advisory body tasked with identifying and reviewing regulatory hurdles to higher productivity.

No action taken.

Strengthen transparency on the role of lobbies in the design of new legislation and regulation, for example, by providing more information in the lobbying register, such as the potential beneficiary and the targeted government action.

No action taken.

Remove limitations on the carrying forward of losses when a start-up firm is sold while taking measures to prevent tax evasion.

A legislation expanding the options for carrying forward tax losses was adopted in 2016.

Remove constitutional barriers to federal government co-funding of education expenditure by subnational governments.

In 2017, the constitution allowed the federal government to provide funding to financially weak municipalities for important investment in local education infrastructure.

Ensure equal access of the most vulnerable to affordable high-quality childcare.

A program reaching out to families advocating the benefits of early childhood education and care system was launched in April 2017.

Improve the quality of early childhood education and care, including by improving the staff-child ratio in accredited facilities; by better integrating education and care; and by ensuring early childhood professionals have better qualifications, more professional development opportunities and better working conditions.

No action taken.

Increase the availability of full-day schooling.

The proportion of full-day schools has reached more than 50%.

Continue to reduce the stratification in the school system, notably by delaying the tracking decision beyond age ten and reducing the number of school tracks across all Länder.

Reduce grade repetition.

Many Länder are merging Haupt- and Realschulen.

Continue reducing the assignment of pupils to special needs schools (Sonderschulen) and make sure assignment to such schools does not reflect the socio-economic background of pupils.

No action taken.

Provide more financial resources to schools with a comparatively high share of pupils with weak socio-economic background in particular at lower secondary level.

No action taken.

Further reform the VET system by considering reducing the variety of VET qualifications and providing continuing education offers of general skills (mathematics, German, foreign languages, computer skills) according to labour market needs.

Let vocational schools and chambers jointly prepare and carry out the final examination of dual VET programmes.

Some courses on general skills are offered since 2015 as response to large enrolment of refugees.

Ensure sufficient and diverse financing of higher education and overcome the free-rider problem between Länder in the financing of university education.

No action taken.

Strengthen life-long learning. Improve transparency in the adult education market and facilitate access to guidance on adult training. Carefully monitor the outcome of financial support programmes for adult learning and education.

A counselling hot line for continuing education was launched in 2015.

Gradually adjust energy tax rates according to carbon intensity. Eliminate exemptions and reduced energy tax rates, except if they are designed to avoid double taxation, notably in sectors covered by the EU ETS.

No action taken.

Introduce taxation of NOx emissions of large emitters. Tax cars according to their NOx emissions.

No action taken.

Phase out tax expenditures for activities that damage the environment without harming international competitiveness, and better align environmental taxation with negative externalities. For example, raise taxes on diesel.

No action taken.

Make feed-in tariffs of renewable energy more cost-effective by linking them to market developments. Consider reforms to move the current support scheme to a competitive auction system.

Competitive auctions were introduced in 2017 to determine the funding for renewable installations.

Provide adequate incentives for the transmission systems operators to invest in the most efficient technologies while extending the grid.

No action taken.