Germany Agrees €7BN Tax Cut in a Bid to Revive Ailing Economy

Germany Chancellor Olaf Scholz on Tuesday announced the government's willingness to cut down some taxes to help companies grow in the staggering economy.

The move by the government will ease the burden on "small and medium-sized enterprises by around seven billion euros ($7.6 billion) per year", the government stated in a statement.

Although there have been conflicts from coalition parties over the size of tax cuts in recent months the German economy noticed a significant drop.

Germany, which is Europe's largest economy, noticed a decrease in the second quarter of 2023 after falling into recession at the beginning of the year.

One of the major reasons for the downside in economic worth was that the country couldn't cope with the effects caused by the Russian war with Ukraine which happened last year causing the skyrocketing of energy and food prices.

Due to the effect, the German government had to go on the "offensive", Scholz said this in Berlin during his first day of a ministerial retreat.

The tax relief was part of the 10-point plan by the German government which is expected to "stimulate growth for the country" and also attract companies to come and invest in Germany, Scholz said.

One of the plans was not to rely on energy from outsiders but to create energy-saving investments that would help the country in future crises. And some changes that will make it easier for firms to write off losses.

However, recent data released shows concerns about the German economy as it shows the eurozone's economic performance this year. Aside from that, the International Monetary Fund is predicting a major fall in the economy in the remaining months of 2023.

Germany's Finance Minister said,

• We take it seriously that Germany is growing less dynamically than others.

• The country however had a "huge turnaround potential", which would be unlocked via the targeted relief package.

For the past months, Germany has been facing major declines in key sectors and the country's exports have plummeted due to high inflation and global economic crisis.

Some of these difficulties were addressed in the government's 10-point plan, which included measures to accelerate the construction of renewable energy capacity and initiatives to minimize bureaucracy.

In order to address industry-wide shortages, Germany passed legislation in June that relaxed immigration rules for skilled workers.