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Tax booster brings uncertainty: country leaders demand compensation!
The federal government is planning tax relief through “investment boosters” to stimulate the economy. Prime ministers demand compensation.
Tax booster brings uncertainty: country leaders demand compensation!
The federal government is planning a comprehensive tax relief known as the “investment booster”. This project aims to stimulate the economy in Germany before the summer break. However, the agreement between the Prime Minister and Chancellor Friedrich Merz (CDU) is in jeopardy before a critical meeting on June 18th. The country leaders are concerned about the possible tax losses and are urgently calling for financial compensation.
The “investment booster” is expected to include a temporary special depreciation of up to 30 percent for investments in movable assets. This regulation should apply from 2025 to 2027. In addition, the federal government plans to gradually reduce corporate tax from 15 to 10 percent from 2028. Further relief is also planned for electric company cars and tax support for research.
Financial impact and reactions
The expected revenue gap of over 48 billion euros by 2029 is of particular concern to the states and municipalities, which would have to bear around 30 billion euros. Hendrik Wüst (CDU), Prime Minister of North Rhine-Westphalia, has already called for financial compensation from the federal government and referred to the principle of connectivity, which states that the federal government should financially cover the tasks of the states. Winfried Kretschmann (Greens), Prime Minister of Baden-Württemberg, is also demanding compensation for the expected shortfall in revenue.
The situation is also causing dissatisfaction among trade unions and political parties. The Verdi union expresses concerns that the tax relief without appropriate compensation could endanger overall economic development and social cohesion. The Left Party rejects the tax relief and calls for a stop to one-sided tax relief.
Draft law and measures
The Federal Cabinet has passed a law for an immediate tax investment program that contains concrete measures to stimulate the economy. According to the Federal Ministry of Finance, the aim of the program is to get Germany back on track for growth and strengthen competitiveness. Short-term changes to tax law are intended to create incentives for investment decisions and provide planning security.
| measure | Details |
|---|---|
| Investment booster through depreciation | Declining depreciation of 30% for movable assets, valid from July 1, 2025 until before January 1, 2028. |
| Reduction in corporate tax | Gradual reduction to 10% from 2028, the total tax burden for companies will fall to almost 25% by 2032. |
| Investment booster for e-mobility | Declining depreciation for electric vehicles between June 30, 2025 and before January 1, 2028, depreciation rate starts at 75%. |
| Investment booster in research | Increase in the assessment basis for tax research allowances to 12 million euros, expansion of eligible expenses. |
Federal Finance Minister Lars Klingbeil (SPD) has already announced that he does not expect a quick agreement and has confirmed plans for a billion-dollar program to support the economy. The coming negotiations will be crucial in clarifying the desired tax relief and the associated financial consequences for the states and municipalities.
For more information: fr.de reports and bundesfinanzministerium.de reports.