Tax policy alone won’t boost Germany’s economic growth

Germany’s ‘Growth Booster’ tax programme mirrors the UK’s past mistakes
Tax policy alone won’t boost economic growth for Germany, say leading audit, tax and business advisory firm, Blick Rothenberg.
Nils Schmidt-Soltau, a Partner at the firm, said: “Germany’s ‘Growth Booster’ tax incentive programme mirrors key changes to the UK Corporation Tax regime implemented by the previous Conservative government. But tax policy alone was not the answer to the growth conundrum faced by the UK, and isn’t the answer for European economies now.”
He added: “The ‘Growth Booster’ was ratified by the German Upper House on 11th July. In terms of tax policy, the programme lowers the corporation tax rate from the current 15% to 10% from 2028 to 2032. This will help German businesses, but cutting taxes is not enough. Businesses need financial investment, and a lack of it was one of the factors that made the UK’s corporation tax cuts ineffective at boosting economic growth.”
Nils said: “Business profits in Germany are also subject to a separate trade tax which is levied by local authorities and typically adds another 15%, resulting in an overall tax rate of 30% for corporate businesses in Germany. Meaning the ‘Growth Booster’ will lower the tax burden for German corporates from 30% to 25%, which is in line with the current UK tax rate.”
He added: “The second change implemented by the programme is a temporary increase in the tax deduction available to German corporates for investment in fixed assets, which are tangible property or equipment owned by a business. It will introduce deductions at 30% per year on a reducing balance basis for investments made from 1 July 2025 to 1 January 2028.”
Nils said: “The current regime grants German businesses a deduction on a straight-line basis over the deemed life of the asset. Only the cost of assets with a purchase price of €800 or less can be deducted in full in the year of purchase. But the temporary enhanced deductions are still far less generous than the full expensing tax deduction available to UK business since 1 April 2023.”
He added: “Although this policy is far more business friendly than the National Insurance Contribution and National Minium Wage rises brought in by the UK Chancellor, Rachel Reeves, increased investment is still key to supporting economic growth in Germany.
The post Tax policy alone won’t boost Germany’s economic growth appeared first on European Business & Finance Magazine.