German Finance Minister promises €30bn tax relief in 2022

Finance Minister Christian Lindner
Finance Minister Christian Lindner gives a speech on December 10th, 2021. Photo: picture alliance/dpa/POOL AP | Michael Sohn
German Finance Minister Christian Lindner (FDP) will offer tens of billions in tax relief to individuals and businesses this year but return to the debt brake in 2023.

“In this legislative period, we will relieve people and small and medium-sized businesses by significantly more than €30 billion,” Lindner told Bild am Sonntag. 

This would partly be done by making pension contributions entirely deductible from tax returns, he said. At the moment these contributions are only partially deductible. 

In addition, Lindner said he was currently working on a Covid Tax Act designed to help businesses that have struggled through the pandemic. 

“In it, a number of relief measures will be created or expanded,” he told Bild. This would mean, for example, that losses from the years 2022 or 2023 could be off-set against profits from the previous years in order to reduce a a small- or medium-sized company’s tax bill. 

“No one should be driven to ruin by tax debts during the pandemic,” Lindner said.  

The new government is also planning to abolish the Renewable Energy Levy (EEG Levy) – a tax added to energy bills to fund renewable energy sources – from 2023. 

The EEG Levy has already been reduced significantly in 2022 to help struggling households cope with surging energy costs.

READ ALSO: How will the cost of living change in Germany in 2022?

Return to the debt brake

Though the tax cuts will shave €30 billion from the treasury’s income, the Finance Minister said it was still his goal to fully adhere to the debt brake again from 2023.

The debt brake, a legal clause that limits how much the German government can borrow, was scrapped in March 2020 to allow for borrowing during the Covid pandemic. Bringing the debt brake back was a key electoral pledge for the pro-business FDP and a red line in negotiations with the centre-left Greens and SDP to form the current traffic light coalition.

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However, Lindner drew criticism from the opposition for reallocating €60 billion in unused pandemic funding to finance investments in green energy and digitalisation. 

After the pandemic, “we must return to sound public finances”, he told Bild am Sonntag. “The margins for 2022 are very small, so only the prosperity that was previously generated can be distributed”.

READ ALSO: German cabinet agrees €60 billion climate investment plan

Specifically, Lindner is keen for the new €50 million government terminal at Berlin’s newly finished BER airport to be abandoned.

“I don’t think a new representative building for state guests and ministers is necessary,” he said, adding that he hoped that the Foreign Office, led by Annalena Baerbock, would change its earlier opinion on this.

Lindner wants the current temporary building to be used on a permanent basis instead.

“Abandoning (this project) would be the signal that we are careful with taxpayers’ money,” he said. 

Berlin Airport

People walk through Terminal 1 at the recently completed BER airport. Lindner is pushing for a new government terminal building to be scrapped. Photo: picture alliance/dpa | Christophe Gateau

‘Brutal redistribution’

Shortly after announcing the plans, Lindner came under fire from the Left Party, who accused the Finance Minister of shifting money from the poor to the rich.

“It’s right to relieve lower and middle incomes,” Jan Korte, parliamentary director of the Left Party, told AFP: “But those who at the same time are not prepared to ask the super-rich Covid profiteers to pay are engaging in brutal redistribution from the bottom to the top.”

Korte called on Chancellor Olaf Scholz to publicly comment on Lindner’s plans.

“When does Olaf Scholz actually intend to take a position on these radical market proposals?” he asked.

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