German finance ministry eyes tax cuts for firms' efficiency and climate investments

The German finance ministry is preparing a law to support companies that invest in energy efficiency and decarbonisation through tax rebates, business daily Handelsblatt reported. Tax support to bolster the competitiveness of companies that make an effort to green their business had also been included in the coalition treaty under the term ‘super write-offs’. However, rather than allowing firms to deduct expenses from their profits, the current plan by finance minister Christian Lindner of the Free Democrats (FDP) focuses on "tax premiums" to ensure that companies making a loss in a given year also get a chance to obtain the support payments, the newspaper said.

The tax reform was initially supposed to take effect in 2022 but had been postponed due to the volatile economic situation during the energy crisis. Lindner plans to also include support for investments in digitalisation and research, according to the report. The exact amount of support funds included in the reform package has not yet been determined, as the finance ministry still needs to spell out details about individual measures and convince the FDP’s coalition partners, the Social Democrats (SPD) and the Green Party, who are in general more sceptical about tax rebates.

Generating sufficient funding for climate action plans is one of the great challenges for Germany’s government coalition. The finance ministry has sought to make more money available for climate action through redirecting unused funds from the country’s coronavirus recovery package to a fund for climate and energy projects. A consultancy in early 2023 gauged the need for investments to expand its renewable power capacity at some 900 billion euros over the next 15 years.