Germany Agrees on Expanded Tax Relief Measures Worth €7 billion

Arne Delfs and Michael Nienaber
·2 min read

(Bloomberg) -- Germany’s ruling coalition agreed on an expanded package of tax-relief measures for companies worth about €7 billion ($7.6 billion) a year, part of a 10-point plan designed to lift Europe’s biggest economy out of stagnation.

Most Read from Bloomberg

Chancellor Olaf Scholz announced the tax measures Tuesday in a statement on the opening day of a two-day cabinet retreat in Meseberg north of Berlin. First unveiled last month and initially valued at around €6 billion, they focus on small and medium-sized businesses, the traditional backbone of Germany’s industrial economy.

“It is of great importance that in this situation we start an offensive by this government to boost growth in this country,” Scholz, flanked by Finance Minister Christian Lindner and Economy Minister Robert Habeck, told reporters.

The tax package was supposed to go through cabinet two weeks ago but was blocked by Greens Families Minister Lisa Paus, who demanded Lindner set aside more money for child benefits. It was the latest dispute in Scholz’s fractious ruling alliance of his Social Democrats, the Greens and Lindner’s Free Democrats.

Lindner and Paus announced that they had sealed a deal on child support on Monday, paving the way for both bills to be signed off in cabinet on Wednesday and then sent to parliament for consultation and eventual approval.

Industry lobby groups have given Lindner’s tax plans a cautious welcome, while criticizing the time it took the government to get its act together. One of the main elements is a new subsidy mechanism for climate-friendly investments — part of the coalition’s blueprint for government agreed in 2021 — to help companies speed the process of cutting emissions.

Scholz unveiled the tax package as part of a 10-point blueprint for fostering investment and boosting competitiveness and productivity as Germany transitions to a more climate-friendly and technologically advanced economy.

Most of the measures have already been announced, including a special Climate and Transformation Fund worth about €212 billion for the period 2024 through 2027.

With their term in office approaching the halfway mark, Scholz and his ministers are keen to demonstrate unity at their meeting in Meseberg.

A series of public spats has helped damage the government’s standing among voters, with the conservative CDU/CSU alliance and the far-right Alternative for Germany party in first and second place in the polls respectively.

“We have a very successful track record last year and this year,” Scholz told reporters earlier Tuesday. “Of course, it would be good if everyone contributed to this with their communication strategies,” he added. “I have the feeling that this retreat will help to ensure that this can also be achieved.”

--With assistance from Kamil Kowalcze.

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.