analyse
It was a tough task to enforce the “Growth Opportunities Act”. In the end, the tax relief for companies only worked through a classic deal. What became of it is just a “light version”.
Everyone actually agrees: Germany urgently needs more growth. The third largest economy is teetering on the brink of recession. After the federal government, the Council of Experts will soon have to revise its growth forecast for the current year downwards. The value of all products manufactured and services provided in Germany will perhaps increase by 0.2 percent this year. If everything goes right. The locomotive is still running – but it no longer has any real drive.
Energy costs, shortage of skilled workers and bureaucracy
The causes of this situation are also not fundamentally controversial: energy is expensive in Germany and there is a lack of skilled workers. The tax burden is high compared to other industrialized countries, and above all: Germany is far too bureaucratic. Because new laws, requirements and reporting requirements are constantly being added (and something rarely goes away), companies are drowning in regulations. Practically everyone complains about it: farmers, craft businesses, business people right up to the CEO of the DAX-listed car manufacturer.
So what to do? The traffic light coalition has addressed all of the problem areas mentioned, but in many cases the effects of political reforms can only be seen after a long time. When it comes to migration policy and the shortage of skilled workers, for example, there is a clear desire to meet the workforce needs of the future – but the goal is still a long way off.
Relief for companies
It is much easier to provide tax relief for companies: all you have to do is change a few laws and companies will have more money in their coffers. Money that they can invest in research and development, for example, and of course in converting to a climate-friendly production method.
That was exactly the core idea of the “Growth Opportunities Act” that Federal Finance Minister Christian Lindner presented last summer. For example, it promised tax credits for investments in climate protection and improved depreciation options. And companies should be able to offset good and bad financial years more easily for tax purposes – a tax consequence of the corona pandemic.
Not easy to enforce at traffic lights
It wasn’t easy for Lindner to enforce his “Growth Opportunities Act” within the traffic light coalition, because at the same time discussions were underway about the 2024 federal budget, which was supposed to bring painful cuts for a number of federal government ministries. The Greens in particular did not like the prospect of further tax support for the economy, while Lindner set the financial framework for the planned basic child security – a project of the Green Family Minister Lisa Paus – very narrowly.
But then the federal government’s plans became known to involve farmers in the upcoming budget restructuring, especially by reducing tax breaks for so-called agricultural diesel. The consequences are well known: hundreds of protesting farmers drove through the government district with their heavy tractors and called on the federal government to withdraw the austerity plans.
Union stood behind farmers
And the wind was already changing for Lindner’s “Growth Opportunities Act”: The Union took up the farmers’ cause, also demanded a withdrawal of the agricultural diesel plans and now made its approval in the Federal Council of the “Growth Opportunities Act” dependent on this.
Now it is not the case that there is a factual connection between the tax treatment of diesel fuel in agriculture and investment incentives or depreciation rules for industrial companies. But since politics is always the art of organizing majorities, the Union saw a good opportunity to distinguish itself as a fighter for the interests of agriculture – and to show the traffic lights the limits of its power. A classic political deal was suddenly on the table: We agree to your “growth opportunities”, but in return you spare “our” farmers.
The law has been thoroughly slimmed down
It happened as it had to happen: the “Growth Opportunities Act” initially did not find a majority in the Bundesrat, the mediation committee of the Bundesrat and Bundestag was called and the law was thoroughly slimmed down: now the relief volume is only half, a good three billion euros. The states can apparently live with this, because tax relief for companies also means loss of income for the states (and ultimately also the municipalities).
Observers say the relief amount can now only be seen as a political gesture and not as an actual economic stimulus. The additional growth that it could trigger is at most in the per thousand range.
Deal – also for the farmers
At the same time, there were informal discussions about where the federal government could do something for farmers. The announced dismantling of the tax privilege for diesel from tractors, combine harvesters and the like will remain the same – in order to save face for the federal government. In the future, however, farmers should be able to offset good and bad operating years (which they always have due to the weather) more tax-efficiently.
The federal government has also promised agriculture that it will reduce bureaucracy. It is also possible that the EU’s ideas on nature-friendly set-aside should not be implemented as harshly as farmers fear. None of this is law yet, but the commitment was enough for the Union to now receive majority approval of the “Light Growth Opportunities Act” in the state chamber.
Chancellor Olaf Scholz called the Federal Council’s approval “an important signal for (…) a successful future for our country.” So a signal has been sent – now the German economic locomotive just needs to gain new momentum.
Lothar Lenz, ARD Berlin, tagesschau, March 22, 2024 1:45 p.m