Germany Greenlights Major Tax Cut Package
(MENAFN) Germany’s federal Cabinet on Wednesday greenlit a sweeping tax relief package totaling €46 billion (around $52.3 billion), aimed at jumpstarting an economy under mounting pressure.
According to an official government statement, the measures will roll out over the 2025 to 2029 period and are designed to bolster business activity and reignite economic momentum.
Key features of the package include enhanced incentives for strategic investment, notably a "super depreciation" scheme allowing companies to deduct 30% annually over three years—offering significant tax relief for businesses.
Additionally, the plan introduces a one-percentage-point reduction in corporate taxes, scheduled to take effect over a five-year span starting in 2028. It also boosts tax breaks for sectors such as mobility and research and development.
Mounting anxiety over global trade was further stoked by ongoing tariff disputes and recent remarks from U.S. President Donald Trump. Many analysts now classify Trump's trade stance as a “special risk” to Germany's already fragile economic trajectory.
Trump’s hardline approach to tariffs has cast a pall over global markets, exacerbating Germany’s economic vulnerability—especially given the nation’s heavy reliance on its manufacturing sector, which continues to face sustained declines in output.
Germany’s economy shrank by 0.2% in 2024 from the previous year, marking the second consecutive year of contraction. Factors such as intensifying competition with China and deep-rooted structural challenges have contributed to the downturn.
On April 24, the government slashed its growth outlook for 2025 from an already modest 0.3% to zero, citing escalating global trade tensions driven by Trump’s policies.
Should this forecast prove accurate, Germany will enter its third straight year without economic growth.
The German Council of Economic Experts, a body that advises the government, also revised its 2025 projection on May 21—lowering expectations from 0.4% to zero.
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