Economic boom: Merz and Klingbeil launch large-scale relief!

Economic boom: Merz and Klingbeil launch large-scale relief!

German Chancellor Friedrich Merz (CDU) announced after the coalition committee that the economy should get going again. As part of this announcement, Finance Minister Lars Klingbeil (SPD) presented a bill to provide tax relief for companies, known under the slogan “investment booster”. This is reported by the FAZ.

The draft comprises 25 pages and six individual projects that promise a total of 17 billion euros in annual relief for the economy. Companies that purchase movable fixed assets between July 2025 and the end of 2027 can depreciate them on a declining balance basis at 30 percent per year. This method has already been used by previous governments and is now to be activated again. A gradual reduction in the corporate tax rate from the current 15 to 10 percent is planned from 2028, with the target value not being reached until 2032. The lower corporate tax is intended to strengthen the international competitiveness of companies.

Measures in detail

The package also provides for the introduction of a new “super depreciation” for electric company vehicles. The value of 75 percent should be tax depreciable in the year of purchase, which applies to purchases between July 2025 and the end of 2027. This also includes electric commercial vehicles such as trucks and buses. An expansion of tax support for research is also being considered.

However, experts such as Johanna Hey from the University of Düsseldorf are skeptical and view the measures as “timid”. The tax measures set out in the coalition agreement between the Union and the SPD from an extensive 144-page document from April 2025 do not appear to be sufficient to provide the desired economic stimulus. These aspects must be officially approved by all three parties for the 21st legislative period, as the Haufe reported.

Additional tax changes

In addition to the corporate tax reform, the coalition agreement also includes plans to reduce income tax for small and medium incomes, which are to be implemented in the middle of the legislative period. Furthermore, an increase in child benefit is planned when the child allowance is increased and there are efforts to improve the situation of single parents.

Further tax measures include a permanent reduction in the sales tax rate for food in restaurants to 7% from January 1, 2026, as well as tax incentives for energy-efficient renovations of inherited properties. The measures are intended to help reduce the tax burden not only for companies but also for private households and to form the basis for strong economic growth.

The cabinet plans to approve the draft law on Wednesday. The implementation of these diverse tax measures will be crucial to vigorously address the economic challenges.