German Parliament Approves Investment Program, Lifting Corporate Tax and Expanding Depreciation
The German parliament, the Bundestag, has approved the government’s investment program, a package of laws aimed at stimulating the economy and promoting business growth. The CDU/CSU and SPD factions voted in favor of the bill, while the Green and Left factions opposed it, with the AfD abstaining.
The approved law, proposed by the black-red federal government, introduces and increases the possibility of depreciation on movable business assets to 30 percent and gradually reduces the corporate tax rate from 15 percent to 10 percent by 2032. For individual companies, the tax rate on retained profits will decrease in three steps from the current 28.25 percent to 25 percent by 2032. Additionally, the law aims to promote electric vehicles and expand the research and development tax allowance.
The measures are expected to lead to a decline in tax revenue of 8.1 billion euros, with the deficit rising to 11.3 billion euros by 2029, primarily affecting the states and municipalities.
Federal Finance Minister Lars Klingbeil, of the SPD, hailed the agreement as a “important signal” that the country is returning to economic strength, signaling to the public that the government is doing everything to secure their jobs. “We are modernizing our country and setting our sights on economic strength” he said.
The AfD criticized the corporate tax cuts, which will only take effect in 2028, while Mathias Middelberg, of the CDU, described the law as a “right step” to bring the German economy out of recession. The Green Party’s Franziska Brantner argued that the tax cuts for companies could have been agreed upon six months earlier, but the CDU had blocked the move. The Left Party criticized the tax cuts, saying they primarily benefit the richest one percent of the population.