Tax reduction decision in Germany

The coalition government made up of the Social Democratic Party (SPD), the Green Party and the Free Democratic Party (FDP) in Germany broke the latest political impasse by reaching a four-year deal on the package dubbed the “Economic Growth Opportunities Law”. . for the ailing German economy. The law aims to create incentives for investment and innovation in the country.

The law plans to provide tax incentives for research and companies, while planning incentives for companies to make climate-friendly investments. In total, a reduction in corporate tax of 7,000 million euros is being considered.

The German Minister for the Economy and Climate Protection, Robert Habeck, in his assessment on the subject stated that the economies are surrounded by difficult conditions, such as high interest rates and weak exports, and stated: “Now we must give signals that investing in Germany is valuable.”

WHAT HAPPENED?

While disagreements over economic and social policies between the parties making up the German coalition government were claimed to negatively affect the economy, the tax cuts in question sparked arguments between the two government ministers from different parties.

Family Minister Lisa Paus and Finance Minister Christian Lindner have been discussing for months “how much additional money should be allocated” to child benefits.

The Lindner-supported “Economic Growth Opportunities Law” was previously blocked by Green Party Family Minister Lisa Paus, who demanded 12 billion euros under the “Child Safety Basic Bill”.

Paus called for more funds for low-income families, while Lindner said only limited funds were available.

After months of disagreement between ministers, an agreement was reached yesterday to provide children with “basic livelihood security”.

Consequently, the German government foresees an additional spending of approximately 2.4 billion euros for child care under the “Basic Child Safety Bill” from 2025.

THE ECONOMY IS EXPERIENCED

According to data from the German Federal Statistical Office (Destatis), the economy contracted 0.4 percent in the last quarter of last year and 0.1 percent in the first quarter of the year, but failed to grow in the second quarter of the year.

While numerous crises, such as the Covid-19 outbreak, supply chain disruptions, and the Russia-Ukraine war, have brought weak aspects of the economy to the surface, the fact that many countries, especially China, can produce more and more Imported goods from Germany and rising interest rates with high inflation accelerate the growth of the German economy, but also make it more difficult.

Slowing global growth, falling industrial production and consumer efforts to cope with rising inflation are also negatively affecting the German economy. (AA)