Time pressure for Olaf Lies: The federal government must clarify tax losses by next week!

Time pressure for Olaf Lies: The federal government must clarify tax losses by next week!

Lower Saxony's Prime Minister Olaf Lies raises an urgent question: the federal and state governments are under considerable pressure to develop a concept to compensate for tax losses. This must be available by next week in order to stabilize the financial situation of municipalities and states, which are already heavily burdened by the current economic situation. Lies spoke before a series of meetings between the Prime Ministers in Berlin and made it clear that the negotiations on the investment program, which is intended to stimulate the weak economic situation, are characterized by a high degree of urgency. The Bundestag will decide on the program on June 26th, before the Bundesrat is also scheduled to vote on July 11th. A quick agreement is necessary to decide on the relief before the summer break in July, as it is already the third year without economic growth and many countries have to work with austerity budgets.

The investment program provides for expanded tax depreciation options for companies that purchase machines and electric vehicles, for example. There are also plans to reduce corporate tax from 2028. However, the federal and state governments are demanding financial compensation to compensate for the loss of tax revenue, as the plans will lead to significant losses. According to estimates, the federal, state and local governments are losing almost 50 billion euros in tax revenue as a result of the law. The federal government plans to cover a third of these costs, while the states and municipalities will cover the remaining two thirds.

Financial compensation and criticism of the countries

The federal states support the tax relief, but feel disadvantaged and are demanding appropriate financial compensation. Prime Minister Hendrik Wüst (CDU) emphasized in the Federal Council that the states should not be left with the costs. Prime Minister Manuela Schwesig (SPD) criticized the distribution of the resulting costs as unfair. Without such financial compensation, several state leaders cannot agree to the tax package in the Federal Council.

The federal government has launched a multi-billion dollar tax package to strengthen the economy, and the support of the states is crucial for its implementation. Finance State Secretary Rolf Bösinger confirmed that a constructive exchange is taking place about the investment program in order to initiate the most necessary steps. The pressure is growing as companies in Germany are put under additional strain by geopolitical tensions, such as the increase in tariffs on steel and aluminum by the USA.

Decisions and outlooks

Next week, the Prime Ministers will meet with Chancellor Friedrich Merz (CDU) to find a solution to the pressing questions surrounding the investment program. It currently remains to be seen what the final agreement between the federal and state governments will look like and whether this can be reached in time for the planned tax relief to come into force.

For the municipalities and states, there must be clarity about the solutions before the vote in the Bundestag to ensure that the tax measures can have the desired effect. How the missing funds are compensated will be crucial for approval in the Federal Council. The future of the investment package is therefore in jeopardy and requires urgent solutions.