Tax relief in danger: Countries demand compensation for tax losses!

Tax relief in danger: Countries demand compensation for tax losses!

The federal government has decided on a comprehensive investment package to strengthen the economy, which in particular provides tax relief for companies. These measures are intended to help lift the economy out of the current recession. Finance Minister Lars Klingbeil (SPD) has presented a bill that includes, among other things, expanded depreciation options for electric vehicles and machines. In addition, the aim is to gradually reduce corporate tax from 15% to 10% by 2032. This is intended to quickly initiate growth-effective investments and promote the long-term stability of the economy, reports daily news.

The federal states support the tax relief, but are demanding financial compensation for the resulting tax losses. Prime Minister Hendrik Wüst (CDU) emphasized in the Federal Council that the states and municipalities should not be left with the costs. The federal government's draft envisages that almost 50 billion euros in tax revenue will be lost, with the federal government planning to cover a third of the tax losses. The remaining two thirds should be borne by the states and municipalities, which Prime Minister Manuela Schwesig (SPD) criticized as unfair. Without this financial compensation, the package is considered ineligible for approval by the Federal Council, reports ZDF today.

Details about the investment package

The proposed investment package includes several key measures. Newly purchased electric vehicles used for business purposes should be deductible at 75% of the cost in the year of purchase. In addition, special depreciation of up to 30% on movable assets is planned for the years 2025 to 2027, which will apply from June 30, 2025. The measures aim to improve Germany's competitiveness and visibly reduce the burden on companies beyond the legislative period. According to estimates, the package will provide relief for companies in the first few years with 2.5 billion euros in 2025, and the relief is expected to rise to 11.3 billion euros by 2029.

Next week, the prime ministers will meet with Chancellor Friedrich Merz (CDU) to negotiate financial compensation payments. Finance State Secretary Rolf Bösinger sees the constructive exchange about this important investment program as crucial for a timely agreement. A quick agreement is necessary in order to finally decide on the desired relief before the summer break in July.

In parallel to the economic development measures, the Federal Council also decided on a pension increase of 3.74% from July 1st. This decision means a monthly increase of 66.15 euros for a standard pension after 45 years of contributions, benefiting over 21 million retirees. At the same time, draft laws are intended to provide more scope for all-day care during the holidays, including through offers from sports clubs and an extension of the funding period for the investment program until the end of 2029.