BERLIN – On Wednesday, Germany’s newly established administration introduced an initiative aimed at revitalizing the nation’s economy through a series of tax incentives and eventual reductions for businesses. The move is intended to stimulate investments and revive an economy that has faced contraction in the past two years, with predictions of stagnation for the current year.
Chancellor Friedrich Merz’s Cabinet gave the go-ahead for the “growth booster program,” which still requires approval from lawmakers. At the heart of this plan is a significant tax write-off for investments in machinery and other equipment over a three-year period. This will be followed by a phased reduction in the corporate tax rate, decreasing from the current 15% down to 10% between 2028 and 2032.
Additionally, the plan includes tax incentives over the next 2½ years for businesses purchasing electric vehicles and measures designed to promote investments in research and development. Vice Chancellor and Finance Minister Lars Klingbeil highlighted that these efforts are aimed at enhancing Germany’s appeal as an internationally competitive business hub. As the largest economy in Europe, Germany plays a crucial role on the continental economic stage.
Various industry groups have voiced their demands for further support, specifically in relation to lowering electricity prices, underscoring the need for comprehensive economic revitalization strategies.
The initiative revealed on Wednesday differs from the 500 billion-euro (approximately $570 billion) investment fund that Merz’s governing coalition had already secured prior to taking office last month. This fund is strategically designed to improve Germany’s aging infrastructure over a 12-year timeline.
Klingbeil announced that the government intends to present legislation to formally establish the infrastructure fund by the end of June, signaling further commitments to long-term economic growth.