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Germany’s upper house of parliament has approved a €46 billion ($54 billion) corporate tax relief package aimed at revitalizing the country’s slowing economy. This marks the first major economic stimulus effort by the new government as Germany faces the risk of a third consecutive year of economic contraction—an unprecedented event in its post-war history.
The relief package, approved for the period from 2025 to 2029, includes sweeping changes to corporate tax rules, including:
- Accelerated depreciation options of up to 30% annually for three years for business investments.
- A 75% first-year depreciation incentive for electric vehicle purchases by companies.
- An annual one-percentage-point cut to the corporate income tax rate, starting in 2028, with a planned reduction to 10% by 2032.
German Finance Minister Lars Klingbeil said the reform package is designed to “create strong investment incentives, secure jobs, and make Germany more competitive internationally.”
An analysis by the Cologne Institute for Economic Research (IW) estimates that the reforms could raise Germany’s real GDP by an average of 0.15% per year, add €29 billion in economic output by 2029, and result in 16 billion euros in additional investment. Up to 39,000 new jobs could be created as a result.
To win state-level support for the tax cuts, the federal government also pledged €8 billion in additional investments for education, daycare centers, and modern hospitals.
This package signals a strategic pivot by the German government, prioritizing long-term private sector investment to spur growth amid sluggish demand and external economic pressures.
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