The Pfizer / BioNTech coup has an unexpected side effect on the German municipality where scientists first developed it: for the first time in three decades, the city of Mainz expects to free itself from its debts thanks to the revenue taxes generated by the company’s global success.
Mainz’s decision to use its financial windfall to cut corporate tax rates as well in hopes of luring industry, especially biotech companies, is drawing criticism from neighboring cities and economists, however.
The city of about 217,000 inhabitants of the western state of Rhineland-Palatinate has been in crushing debt since the early 1990s, when the authorities took out a loan that reached 1.3 billion euros (1.1 billion euros). pounds sterling). In the first year of the pandemic, the Rhine River City’s debt accumulated an additional 30 million euros in interest alone.
But the success of BioNTech, whose founders Uğur Şahin and Özlem Türeci worked with pharmaceutical giant Pfizer to test and manufacture their vaccine Comirnaty in 2020, transformed Mainz’s fortunes.
Instead of a planned budget overrun of 36 million euros in 2021, the city’s Senate announced a budget surplus of 1.09 billion euros this winter. With another surplus of 490.8 million euros expected in 2022, Mainz hopes to clear its remaining debt within a year.
Due to German tax secrecy laws, BioNTech has not been officially named as the source of what the Mainz Senate calls the city’s “Cinderella story”. But the sheer wealth of the company that created the first vaccine authorized in the West is no secret. In January-September 2021, BioNTech made € 10.3 billion in pre-tax profits, of which it paid € 3.2 billion in taxes – although the company has several locations in Germany and has no specified which municipalities the money went to.
Prior to the Covid-19 pandemic, Mainz’s main gift to the world was the printing press, whose inventor, Johannes Gutenberg, developed a method of movable type printing in the city around 1440.
The mayor of Mainz, Michael Ebling, said that the groundbreaking development of BioNTech’s mRNA vaccine was of equally exceptional importance. He told the Guardian he wanted to use tax money to pay off his city’s debts, rather than invest in spectacular infrastructure projects. “Christmas may be upon us, but for the city of Mainz now is not the time to make long wish lists,” said Ebling. “The tax windfall will certainly make it easier to honor the other achievements that our city has offered to the world.
In addition to promoting Mainz’s role in the printing revolution, the mayor said he would nurture his reputation as an innovator in football: Liverpool coach Jürgen Klopp and Chelsea’s Thomas Tuchel first met made known by managing local Bundesliga club Mainz 05. “We can renovate the Gutenberg printing museum and our football fields will remain in such a condition that every player can play a clean pass,” he said.
Ebling’s biggest plan, however, is to build on the success of vaccine makers and turn Mainz into a global biotechnology hub: a 12-hectare (30-acre) piece of land near the headquarters of BioNTech, the university clinic and the German Cancer Research Center was assigned For development.
Over the next 10 years, the city hopes to create 5,000 new jobs, in part by attracting businesses through much lower corporate tax rates, which German municipalities can impose in addition to the federal corporate tax rate. companies by 3.5%. Mainz plans to cut its corporate tax rate from 440 to 310 percentage points, by far the lowest of German cities with more than 50,000 residents.
The Senate said the reduction was a giveaway not only for science startups looking for a new home, but also for small businesses that have suffered from the pandemic. A spokesperson denied that the reduced tax rate was designed to prevent BioNTech from moving to other low-tax regions.
But in Wiesbaden, theoretically Mainz’s richest brother across the Rhine, local politicians criticized Mainz as “extremely lacking in solidarity,” while economists predicted the move could trigger a race to the bottom. among German cities.
“It is understandable that Mainz lowered the tax rate, but I would share the criticisms of local politicians as to the extent to which they are reducing the rate,” said René Geissler, professor of public management at the Technical University of Sciences applied by Wildau. “It’s a bit of a bomb.”
“This will create enormous pressure on other cities to follow suit,” he added, wondering if the plan would necessarily bear fruit. For startups, he said, a low tax rate was often much less important when choosing their headquarters than proximity to research institutions or companies working in the same field, conditions already on offer. by Mainz.