A leading German economic research institute is advocating for the permanent implementation of accelerated depreciation allowances, currently available through a temporary investment incentive program. A study released today by the Ifo Institute suggests the measure stimulates economic growth.
According to Andreas Peichl, head of Ifo’s Center for Macroeconomics and Surveys, both the planned corporate tax reduction and the introduction of accelerated depreciation contribute to a long-term increase in the capital stock – the total amount of resources available for production – and consequently, investment.
The institute’s analysis highlights accelerated depreciation as particularly effective. Modeling suggests it leads to a significant increase in the capital stock, especially for durable investment goods. Crucially, the measure places a relatively minimal burden on public finances, with most scenarios indicating near self-financing. While the proposed corporate tax reduction also boosts investment, it would result in a net decrease in government revenue of approximately eleven billion euros annually.
Ifo researcher Manuel Menkhoff argues that extending accelerated depreciation beyond its current expiry date of 2027 – making it a permanent fixture – would be a prudent move. This would provide greater planning security for businesses, maintain investment incentives, strengthen Germany’s economic position and all at manageable budgetary costs.