The Tax Relief Package for Companies: Here's the Lowdown
Anticipates State Governments' Consent for Businesses' Tax Reduction, According to Chancellor Merz
Chancellor Friedrich Merz is betting big on the approval of a multi-billion euro tax package, geared towards economic revitalization, by the Bundesrat. With the cabinet's seal of approval in hand, Chancellor Merz is optimistic that the states will follow suit. "It's a nationwide mission aimed at boosting investments and creating jobs," claimed government spokesman Stefan Kornelius in Berlin.
This package, approved in June 2025, holds a significant weight of approximately €46 billion. It's part of a broader effort to stimulate economic growth, an endeavor hampered by high production costs, intense competition, and global trade tensions.
Key Features of the Tax Package
The package includes a strategic reduction in the corporate tax rate, planned to decrease by one percent annually from 2028. By the end of the decade, the rate is set to reach a modest 10%, down from the current 15%.
Companies will also experience a short-term stimulus, as they'll be permitted to deduct up to 30% of the costs of new machinery and equipment from their tax bills between 2025 and 2027. Electric company cars are set to receive preferential tax treatment as well, prompting more environmentally friendly practices.
The Big Discussion
Chancellor Merz will engage in heated discussions with the minister-presidents on various economic matters, including tax packages, infrastructure, and digitization. The government is currently in the process of establishing a federal-level construction law, paving the way for budget planning.
While details of these discussions remain unclear, the tax package is a crucial part of a broader strategy aimed at showcasing Germany's commitment to economic growth, especially now as it prepares to meet with U.S. President Donald Trump [5]. The government aims to implement comprehensive reforms and increase public spending to tackle economic obstacles [3][4].
The Tax Relief Package: A Boost for All
According to Kornelius, these tax revenues generated from the economic relief package will prove beneficial for both the federal and state governments, as well as municipalities. With this strategy, a positive cycle is expected, where the economic revival yielding new tax revenues eventually benefits all involved.
But, as Kornelius rightly points out, it's not wise to focus solely on the potential disadvantages of cuts without considering the potential benefits. Therefore, expect this topic to dominate the Chancellor's dinner with the minister-presidents.
[1] German cabinet approves €46bn corporate tax relief package. (2025, June 01). ntv.de.
[2] The State of the German Economy in 2025. RTS.
[3] The Chancellor's Agenda for Economic Growth. rheinischen-post.de.
[4] Tackling Germany's Economic Challenges: A Comprehensive Approach. bwconvent.com.
[5] Germany and the USA: A Meeting of Minds on the Global Stage. spiegel.de.
- The tax relief package, which includes strategic reductions in employment policy for businesses, aims to stimulate economic growth, particularly in areas such as finance, politics, general-news, and business, and is part of a broader effort to address high production costs, intense competition, and global trade tensions.
- The Community policy will be impacted by the tax relief package, as the generated tax revenues from the economic revival are expected to benefit not only the federal and state governments but also municipalities, creating a positive cycle that could further encourage investment and employment policies nationwide.
