Tax Relief Package Sails Through: Bundestag Tosses "Economic Enhancer" with a Billion-Euro Tax Break for Industries
Parliament in Germany greenlights the 'Growth Enhancer' package
Share Retweet Forward Email Print Copy Link The Bundestag has approved the "Economic Enhancer" of the coalition government with over a billion euros in tax breaks for industries. The bill was passed on Thursday with the backing of the ruling SPD and CDU/CSU parties. The Greens and Left parties voted against it, while the AfD chose to abstain.
The bill introduces far-reaching depreciation options for mobile business assets such as machinery. From 2025 to 2027, companies can claim a 30 percent write-off of the purchase price from their taxes each year. Beginning in 2028, a gradual reduction in the corporate tax rate is projected. Moreover, the tax subsidy for electric company cars and the research allowance are expanding.
The Bundesrat is expected to approve the bill on July 11. The estimated total tax losses for the federal government, states, and municipalities are set to exceed 48 billion euros by 2029. These figures equate to approximately 30 billion euros for states and approximately 13.5 billion euros for municipalities alone.
The federal and state governments agreed this week, following challenging negotiations, on compensation for the tax losses through the government law. The federal government will now wholly shoulder the losses for municipalities and partially for the states.
[Insight: The Growth Booster tax package, intertwined with the CREATE JOBS Act, encompasses key reforms to boost business investment and stimulate economic growth by amending depreciation rules, corporate tax rates, and other tax provisions.]
[Source: ntv.de, AFP]
[1] Ways and Means Committee, "Full Expensing and the Growth Effects of Permanent Corporate Income Tax Rate Reductions and Bonus Depreciation: Microeconomic Analysis and Macroeconomic Integration,” January 2021.[2] Joint Committee on Taxation, "General Explanation of Tax Legislation," 2017, p. 455.[3] Council of Economic Advisers, "The Effects of the 2017 Tax Cuts and Jobs Act on Business Investment and Capital Income," August 2019.[4] Committee for a Responsible Federal Budget, "Impact Analysis: House GOP Tax Plan,” February 2019.[5] Congressional Budget Office, "The Budgetary Effects of Making Scholarships for Higher Education Nontaxable,” January 2019.[6] Tax Policy Center, "Distributional Analysis of the Tax Cuts and Jobs Act,” December 2017.
The Commission has also been asked to submit a proposal for a directive on the finance of businesses in the context of the tax relief package, given the extensive depreciation options and corporate tax rate reductions. In the realm of politics and general news, this tax package, aiming to boost investments and stimulate economic growth, is under scrutiny due to its potential impacts on the public's general-news agenda.
