It's a (sadly) rational policy to ignore small business
Europe is full of good initiatives right now to make starting a company easier. Good timing, given the viral notes about sitting through (and paying for) a 12-hour notary appointment in Germany to register a GmbH.
But I think a lot of the policy-versus-bureaucracy frustration is just a misunderstanding. Fiscally, ignoring small business is reasonable.
Where the turnover actually sits.
Micro firms aren't rare. Germany has around 7 million VAT-registered businesses, and about 5 million of them turn over less than €100k a year. Those 5 million together make 1.2% of all turnover. The top 1% of firms make roughly 80%. Just 3,190 companies, 0.04% of the total, book more than half. Tax and social revenue track the same curve, by proxy.
Nothing on the personal side comes close. The corporate turnover Gini sits near 0.96; personal income is around 0.5. That's less a verdict on big firms than a map of where the money sits.
Concentrated even by European standards.
Market dominance — HHI ×100
How much a market is run by its biggest players. Higher = more concentrated. Selected of 15 countries.
| Country | HHI ×100 |
|---|---|
| Slovakia | 2.50 |
| Switzerland | 1.21 |
| Czechia | 0.80 |
| Netherlands | 0.78 |
| Finland | 0.73 |
| Germany | 0.62 |
| France | 0.20 |
| Italy | 0.13 |
Turnover spread — Gini
How unevenly turnover is split across firms, 0 (even) to 1 (all in one). Top 10 of 34.
And Germany isn't middling here. On both common measures of corporate concentration it sits at or near the top, above France, Italy and Spain. So the neglect makes sense. If the small end is a rounding error in the base, leaving founders to the notary and the forms is the rational call. The concentration is hard, and it's set at the level of the whole economy.
Tax revenue won't supply the reason.
This is where I keep coming back to Christensen. The prescription is to back the seemingly irrational low end early. Inside a company that happens because someone at the top believes in it and shields the bet. A state has no one in that chair, and tax revenue won't supply the reason: the payoff, if it lands, is decades out and credited to no one in office.
So maybe the move isn't more incentives. It's letting some risk into the system. American VC really took off once pension funds were allowed in, around 1979. Here that capital is still mostly steered away from risk. University spin-outs are the other obvious source, and they need endowments and funding rules that barely exist. None of that needs the state to pick winners or write cheques. Just looser rules on where existing capital can go.
Where the risk capital actually comes from, I haven't worked out. Pension reform seems like the obvious first move. I'm less sure what comes after.
Method & sources
Everything here is computed from primary public statistics — no commercial databases. Business-turnover concentration: Destatis Umsatzsteuerstatistik (Veranlagungen), table 73321-0004, reporting year 2021 — 7.2 million VAT-registered businesses and €8.1tn of taxable turnover. Personal income: Lohn- u. Einkommensteuerstatistik (73111-0005), 2022. Cross-country comparison: Eurostat Structural Business Statistics and the IWH/CompNet firm-concentration study.
- The corporate turnover Gini (~0.96) is a grouped estimate from turnover size-class bands; the true value is higher. The cross-country Gini uses five employment-size bands, so it is a lower bound — read the ranking, not the level.
- HHI and the turnover Gini measure different things. Germany is #1 on the turnover Gini but 6th on HHI: its turnover sits in large, low-markup firms, not monopolised markets.
- Personal income here is Gesamtbetrag der Einkünfte — pre-tax taxpayer income, Gini ~0.49. The household disposable-income Gini usually quoted for Germany is about 0.28 (Eurostat SILC), a different concept.
- Turnover is a proxy for the tax and social-contribution base, not tax actually paid; the statistic also largely excludes the smallest Kleinunternehmer (under €22k).
Sources: Destatis GENESIS 73321-0004 (Umsatzsteuer), 73111-0005 (Lohn-/Einkommensteuer); Eurostat sbs_sc_ovw (SBS, 2023) and ilc_di12 (SILC disposable-income Gini); Bighelli, Di Mauro, Melitz & Mertens, “European Firm Concentration and Aggregate Productivity,” IWH-CompNet Discussion Papers 3/2021.
Disclaimer
This is independent research commentary, written for general information. It is not investment, legal, tax or policy advice. All figures are the author's calculations from public statistics, may contain errors, and describe a moment in time. Statistical-office, agency and dataset names are used for identification only and imply no affiliation or endorsement. If you find an error, the underlying tables are public and I'd rather hear about it than not.