Small & medium sized businesses, have greatly expanded their
equity since 2000 (Deutsche Bundesbank 2013).
It is often asserted that businesses are failing to invest
in Germany and instead seeking lower costs abroad.
These claims have generated a whole discussion about
Germany’s industrial competitiveness and created fears
that German companies are exporting production and
jobs wholesale. But this interpretation is at odds with
Moreover, the corporate taxation reform of 2000
abolished the tax disadvantage for retained earnings by
reducing the previously different rates of corporation
tax on distributed and undistributed profits to a single
rate of 25 percent. The corporate taxation reform of
2008, which cut corporation tax again to 15 percent
and slashed the rate of tax on retained earnings for
partnerships and sole traders, also shifted the balance
of incentives away from profit distributions and towards
internal financing (Deutsche Bundesbank 2013).
All in all,the role of external financing, and thus dependency on
banks and other creditors, has steadily declined.