No Tax Hikes in Sight: The Coalition Agreement Excludes Any Plans for Tax Rise - No increase in taxes stipulated within the collaborative accord
In the heart of Germany, a significant shift in the tax landscape is underway. The focus of current tax reform proposals primarily revolves around corporate tax relief, with the aim to reduce tax burdens and promote investment and economic growth.
The most prominent legislative development in this regard is the Bundestag-approved EUR 46 billion business tax reform package. This comprehensive plan includes a phased reduction of the corporate tax rate from 15% to 10% over the years 2028 to 2032. Additionally, it offers enhanced depreciation rules and incentives for electric vehicles and research and development.
Key features of this business tax reform, known as the "Act for an Immediate Tax Investment Programme to Strengthen Germany’s Business Location," include:
- Phased corporate tax rate cuts: From 14% in 2028 down to 10% by 2032.
- Enhanced depreciation: Temporary boosts in declining balance depreciation for assets acquired between July 2025 and the end of 2027.
- E-mobility incentives: More favorable tax treatment for electric company cars, including accelerated depreciation and reduced benefit-in-kind taxation.
The political stance on tax increases has been clear. German Finance Minister and Vice-Chancellor Lars Klingbeil has emphasised the importance of focusing on growth, job security, and fairness while committing to strict budget consolidation and closing tax loopholes to increase revenue without broadly raising taxes. This strategy favours fiscal responsibility alongside targeted tax relief measures rather than broad tax hikes.
The recent federal budgets reflect this approach, with investment, fairness, and fiscal discipline as their key details. The government's focus appears to be on stimulating economic growth through tax relief for businesses and supporting sustainable sectors like e-mobility, while combating tax fraud and optimising revenue collection within the existing framework.
No major political party has proposed general or personal tax increases in the near term. The government's focus seems to be on stimulating economic growth through tax relief for businesses and supporting sustainable sectors like e-mobility, while combating tax fraud and optimising revenue collection within the existing framework.
As the tax reform landscape in Germany continues to evolve, the coalition government, led by Chancellor Olaf Scholz, will make important decisions together, using the coalition agreement as their basis. The coalition agreement aims for tax cuts, and several Union politicians, including Steffen Bilger, Jens Spahn, and Martin Huber, have rejected tax increases. Spahn has also emphasised the importance of consolidating and reducing social security contributions.
However, Finance Minister Lars Klingbeil has proposed possible tax increases for top earners and the wealthy to help fill a gap of 30 billion euros in the 2027 budget. Criticism of proposals for tax increases has come from the CSU, with Chancellor's Office Minister Thorsten Frei stating that the coalition will make important decisions together, using the coalition agreement as their basis.
As the nation moves forward, the focus remains on fostering economic growth, job security, and fairness, while maintaining fiscal discipline and ensuring that the tax system is fair and efficient. The current state of play in Germany’s tax reform landscape, as of mid-2025, reflects this commitment to progress.
- The business tax reform in Germany, primarily aimed at corporate tax relief, aligns with the employment policy as lower taxes encourage businesses to invest and potentially create more jobs, contributing to growth and job security.
- The discussion of potential tax increases for top earners and the wealthy indicates a political focus on addressing economic disparities, which could be instrumental in promoting fairness within the employment policy framework.
