Investment booster: Our way out of the recession!

Investment booster: Our way out of the recession!

Last Wednesday, the coalition committee met to determine the federal government's roadmap until the summer. The urgency of these meetings is clear: Germany is in its third year of recession and measures to stimulate the economy are urgently needed. Federal Finance Minister Lars Klingbeil (SPD) presented a draft for an immediate tax investment program, which is referred to as an “investment booster”. The aim of this program is to strengthen Germany as a business location.

Companies should benefit from advantageous depreciation options and hope for a later reduction in corporate tax. The plan is for companies to be able to depreciate investments in the current and the following two years on a declining balance basis, which enables higher tax deductions at the beginning of the useful life of assets. This regulation applies to movable assets purchased between July 1, 2025 and December 31, 2027.

Tax relief and investment package

Concepts to reduce the tax burden are also on the agenda. From January 1, 2028, the corporate tax rate is to be reduced in five annual steps from the current 15 to 10 percent. In order to ensure international competitiveness, the tax burden on German companies, which is considered uncompetitive in OECD comparisons, will be significantly reduced. However, companies will have to wait until 2032 for the full relief effect.

The tax package also includes regulations on the depreciation of electric vehicles and the tax treatment of corporate profits. The financial impact of these measures is significant: costs of 2.5 billion euros are expected in 2023 and 8.1 billion euros are expected in 2026. For 2027 it is expected to be 11.8 billion euros and for 2028 around 12 billion euros. In 2029 the costs will be 11.3 billion euros.

Costs and investments by countries

These financial burdens affect both the federal government and the states and municipalities. In addition, further reductions in revenue are expected due to the increase in the commuter allowance. Chancellor Friedrich Merz (CDU) recalled that the state representatives helped negotiate the coalition agreement. It is expected that 100 billion euros from the federal government's planned 500 billion euro investment package will be distributed to the states.

Overall, the Federal Government's initiative shows that it is taking companies' concerns seriously and is prepared to take steps to improve the economic conditions. Even if we still have to wait for the full impact of the measures, the approaches presented make it clear how important investments and tax relief are in order to make Germany fit for the future. For further details on the tax regulations and the investment program see Süddeutsche.de and Tagesschau.de.