Germany should consider corporate tax reform, say economy and finance ministers

© Reuters. German Economic Affairs and Climate Action Minister Robert Habeck speaks during a session of the lower house of parliament, the Bundestag, in Berlin, Germany February 1, 2024. REUTERS/Liesa Johannssen/File Photo

FRANKFURT (Reuters) -Germany’s economy and finance ministers on Sunday floated the idea of reforming the country’s corporate taxes as one way to take pressure off companies that are facing numerous challenges, including high energy costs.

Germany has “an overall corporate taxation that is no longer competitive and conducive to investment”, Economy Minister Robert Habeck told weekly Welt am Sonntag.

“This is precisely why we should consider how we can, for example, finance tax relief, tax incentives for investments in the future,” he said.

Habeck said that the government was constrained by what he called “extremely tight financial leeway”, pointing to savings pressure with regard to Germany’s 2025 budget.

His comments come after Finance Minister Christian Lindner called for measures to strengthen the economy, including increased flexibility in the labour market, less red tape as well as tax incentives as part of corporate tax reform.

“I agree with Christian Lindner. We need to do more for growth and economic dynamics,” Habeck said, adding he was working together with Lindner on a reform package.

Lindner told German broadcaster ARD on Sunday that there was agreement that German companies were not competitive internationally, urging swift action to put together a relevant policy package.

“If we don’t do anything Germany will get poorer,” Lindner said, adding that it was paramount to strengthen the country’s weakening economy to ensure prosperity.

While he did rule out a special budget for German corporates, he suggested freeing them from the so-called solidarity tax – introduced after reunification to support poorer states in eastern Germany.

Lindner, who said he was constantly in touch with Habeck, said the pressure was on to produce results now that the two ministers were aligned.

“Now we have to deliver,” he said.


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