Businesses will benefit from relaxed rules on writing down investments. When consumers purchase a new car, they will be exempted from vehicle tax for a period of up to two years. More cash has been made available for the climate protection building upgrading programme and for investment in infrastructure. The same applies to training courses for older workers and poorly qualified workers. And for private households, 20 percent of tradesmen’s bills, up to a ceiling of 20 percent of 6,000 euros a year, will be tax deductible.
The package of targeted incentives for investment is intended to protect the real economy from the impacts of the financial crisis, as Federal Economics Minister Michael Glos explained. It is a "comprehensive package for growth” rather than an old-style economic promotion programme, he underscored. The government does not aim to bring about a short term leap in investment, but to encourage sensible long-term measures. In some cases it will only mean that investments already planned are brought forward.
Federal Finance Minister Peer Steinbrück was calmly confident that the package will help Germany find its way out of the difficult economic situation more rapidly than was originally thought. The business and professional associations in Germany have already welcomed the package, he reported. The tax breaks should help overcome the uncertainty of consumers, for instance when it comes to deciding whether to buy a new car now or whether to wait.
Cushioning the impacts of the financial crisis
Photo: REGIERUNGonline/Kugler
Peer Steinbrück and Michael Glos announce a consensus with various interest groupsThe coming year will not be easy for the economy, warned Michael Glos. Measures taken by the German government at national level cannot turn around the worldwide economic downturn. They can, however, cushion the impacts of the crisis in Germany. The achievements of the government in boosting employment, in particular, must not be reversed by the current economic problems.The reforms undertaken in Germany over the last few years also mean that it is in a better state to master the crisis than other countries, declared the Federal Finance Minister.
The legislative changes needed before the package can be introduced in detail are to be adopted by the Cabinet next week.
In conjunction with the assistance decided on at the beginning of October, the federal, state and local governments will be providing some 32 billions euros over the next two years alone.
To recap: The package passed on 7 October already pushed social security contributions well below the 40 percent mark. Child allowance and the tax-free amount allowed for each child are set to rise. The cut in unemployment insurance contributions alone mean that workers will be paying 30 billion euros less, the Federal Finance Minister calculated. We must not lose sight of this.
Budget consolidation still the goal
Nobody in the German government intends to abandon the goal of balancing the budget, however, the Federal Finance Minister stated unequivocally.
Because of the changed global economic environment, it will no longer be possible to achieve a national budget in Germany with no new borrowing in 2011 as planned. This does not mean that the objective has been abandoned though, said Peer Steinbrück. In the coming legislative period, the government will do all it can to achieve a budget that does not involve any new borrowing.
Overcoming the credit crunch for businesses
To prevent the credit crunch affecting small and medium businesses and manufacturing industry, the federally-owned KfW Bank is to be granted an additional financing instrument, Michael Glos announced. The so-called precautionary shield will allow the bank to reinforce the lending services offered by commercial banks. A total of 15 billion euros has been earmarked for this purpose.
Impetus for investment
Relaxed write-down rules
For a limited period of two years, the German government aims to reintroduce what is known as declining write-down provisions of 25 percent on movable assets as of 1 January 2009. This should help the mechanical engineering branch in particular, Michael Glos stated confidently.
Under the new rules, businesses will be able to write down from their taxes a higher percentage of the costs of movable assets purchased or manufactured in the first two years. This would apply, for instance, to machinery or vehicles.
Additional investment in building modernisation and infrastructure
The German government aims to encourage investment in making buildings more energy efficient. An additional three billion euros have been made available for the CO² building modernisation programme for the period 2009-2011. More cash is also to be made available to encourage modifications to buildings that will allow the elderly to continue living at home, and to renovate schools, nurseries and sports facilities.
The funding of the infrastructure programme for structurally weak districts too is to be topped up by three billion euros. Special low-interest rates will also be made available for a limited period only.
The German government will be making urgently needed investment in rail transport, protection against traffic noise, trunk roads and waterways sooner than originally planned. To this end the government will be making available one billion euros for each item.
Private households too to benefit
The tax incentive for employing tradesmen to undertake maintenance and modernisation measures in private households will be doubled in future. Private households will be able to deduct 20 percent of the costs of measures of this sort, up to a ceiling of 20 percent of 6,000 euros, from their tax bills. A maximum sum of 1,200 euros will thus be tax deductible. After a two-year period the impacts of this new regulation will be reviewed for effectiveness.
Tax relief on vehicle tax for a limited period
A limited-period tax holiday on vehicle tax for cars is intended to encourage the development and wider use of more fuel-efficient vehicles. At the same time, it is hoped that this will facilitate the essential adaptation process within the automobile branch.
The German government also aims to overcome consumers’ reticence to purchase new vehicles at the moment, until vehicle tax is revamped on the basis of CO² and other harmful emissions.
With immediate effect, no vehicle tax will be payable on all new vehicles for a period of one year. Vehicles complying with Euro 5 and Euro 6 emissions standards will be exempted from vehicle tax for a period of two years. All vehicle tax relief will end on 31 December 2010.
Saving jobs – businesses to retrain staff rather than cutting their workforce
The impetus for investment is also to help save jobs. During this period of economic gloom, businesses are to be encouraged to retrain their workers rather than letting them go. To this end the government will also be supporting businesses in their training and upgrading measures.
For one year only the government will be extending the period for which workers can be granted short-time allowance, from 12 months to 18 months. The period when workers are placed on short-time can also be used for further training. The special programme for older workers and workers with few qualifications is also to be rolled out nationwide. Further training parallel to normal employment is to help prevent job losses.
The Employment Agencies are to employ an additional 1,000 placement officers who will be responsible for job-to-job placements, i.e. finding new posts for individuals who have lost their jobs before their period of notice comes to an end.
