Germany plans to offer companies $6.6bn a year in tax relief

BERLIN: Germany’s finance ministry plans to offer companies a tax relief package of around 6 billion euros ($6.61 billion) per year against the backdrop of a difficult economic environment, ministry sources said.

German business morale has been deteriorating, suggesting that Europe’s largest economy will struggle to shake off recession.

“The economy needs stimulus - rarely has this been so urgent as now,” finance minister Christian Lindner tweeted on Wednesday.

The tax relief plan will be part of the draft Growth Opportunities Act, which the Free Democrat Lindner has proposed to make Germany more competitive amid high energy prices and burdensome bureaucracy.

The draft legislation includes a total of almost 50 tax policy measures, mainly aimed at small and medium-sized enterprises, the sources said.

One key provision incentives companies to invest in climate protection by offering tax benefits between 2024 and 2027 if they make climate friendly investments, the sources said.

Lindner’s package provides stronger tax incentives for research. It also would allow companies to offset more losses against profits from other financial years and make it possible to take write-offs for low-value assets more quickly.

While the business community welcomed the initiative, the other coalition parties have shown scepticism in certain areas.

The Federation of German Wholesale, Foreign Trade and Services (BGA) welcomed the plans. “Tax simplifications and better depreciation options are important incentives for more investment in Germany,” said BGA President Dirk Jandura.

Katharina Beck, the financial policy spokesperson of the Green parliamentary group in the Bundestag, said this proposal does not do justice to the world’s fourth-largest industrial nation, noting to Reuters that there are not concrete incentives for investments in battery, solar or hydrogen technology.

Green member of the Bundestag Bruno Hoenel also said incentives for research funding need to be more concrete.

SPD member of the Bundestag Tim Kluessendorf welcomed mandatory e-billing, while adding that his party will advocate for stronger efforts in this area.

SPD politician Michael Schrodi said the proposals would significantly decrease revenue from corporate taxes. “This particularly affects the municipalities, whose budgetary situation is more critical than that of the federal and state governments,” SPD Bundestag member Lennard Oehl said.