Elimination of taxation for senior citizens - abolishment of taxes for pensioners
In a significant move to modernize the tax system, Germany is planning to abolish the obligation for tax returns for a large portion of taxpayers and instead implement automated tax assessments. This reform, primarily targeting pensioners and those with straightforward income situations, is part of the government's efforts to stimulate economic growth and simplify financial processes.
The new coalition government, formed in May 2025, has been working on reforms to reduce corporate taxes and encourage investments. Simultaneously, pension policy reforms have been made to improve pension adequacy and support older workers, allowing them more flexibility in work while drawing pensions. These reforms suggest the government's broader interest in simplifying tax-related processes for pensioners.
The Federal Ministry of Finance has been exploring ways to modernize tax processes, with drafts addressing income taxation adjustments. However, the legislative process for these reforms is still pending.
The proposed change would make the filing process largely automatic, relying on data the tax authorities already have. For pensioners, this could mean that the tax return could be replaced by an automatic source deduction directly through the pension office.
Economist Sebastian Blasse from Leipzig University supports this digital reform of the tax system, arguing that it would be a matter of justice. He highlights research findings showing that people with lower incomes often do not file a tax return due to bureaucratic effort, but often have a claim to refunds.
The reform also includes plans for the gradual expansion of "pre-filled and automated tax returns" for simple tax cases. This would reduce effort, time, and costs for both the state and the taxpayer.
The German Tax Union (DSTG) is pushing for a replacement of the tax return with an automated solution, modeled after Austria's system. The DSTG CEO Köbler argues that digitization can counteract the growing shortage of skilled workers in the tax administration. This expansion is planned through "stronger digitalization and Artificial Intelligence".
While specific legal enactments detailing the abolition of tax returns have not yet been finalized or made fully public as of mid-2025, the intent to proceed in this direction is clear. For the most current and detailed specifics, monitoring announcements from the Federal Ministry of Finance or new legislation following the recent government formation and tax reform initiatives is advisable.
The Federal Ministry of Finance is considering expanding the use of automated tax assessments, extending it to simple tax cases, a move that could potentially reduce effort, time, and costs for both the state and taxpayers. Economist Sebastian Blasse, from Leipzig University, supports this digital reform, arguing that it would be a matter of justice, particularly for individuals with lower incomes who often forego filing a tax return due to bureaucratic effort, yet often have claims to refunds.
In line with these efforts, the German Tax Union (DSTG) is advocating for the replacement of tax returns with an automated solution, modeled after Austria's system. This digitalization, according to DSTG CEO Köbler, could help counteract the growing shortage of skilled workers in the tax administration and is intended to be achieved through stronger digitalization and Artificial Intelligence.
