Söder and Bayaz Propose Accelerated Corporate Tax Cuts to Stimulate German Economy

Bavarian Minister President Markus Söder and Baden-Württemberg Finance Minister Danyal Bayaz have jointly called for an acceleration of Germany's planned corporate tax reductions to boost the struggling economy. Currently, the corporate tax rate is scheduled to gradually decrease from 15% to 10% by 2032. However, Söder proposes advancing the timeline by initiating the reduction from 2028 to July 2026. He stated, "It would give our economy an important impulse," emphasizing that the existing plans are insufficient given current economic challenges.

Bayaz supports this early move by advocating for a two percentage point corporate tax cut as early as next year, aiming to achieve the 10% target within the current legislative period. This stance comes amid ongoing economic difficulties, particularly in regions like Baden-Württemberg where the automotive and machinery sectors are heavily affected ahead of state elections.

The SPD has expressed concerns regarding the proposals. Vice Parliamentary Leader Wiebke Esdar emphasized the importance of coalition trust and cooperation, criticizing the lack of clarity on how these tax cuts would be financed. Söder acknowledges fiscal constraints and ties the tax cuts to the federal budget, while Bayaz argues that other projects should be deprioritized to finance the measures given the economic urgency.

Alongside this proposal, companies currently benefit from a recently approved tax package allowing them to depreciate machinery and equipment expenses at a rate up to 30% over the next two years, intended to improve liquidity and international competitiveness.

This unusual alliance between the CSU-led Bavaria and the Green-led Baden-Württemberg reflects growing political momentum to support businesses amid economic headwinds, despite the coalition tensions it has sparked. The debate highlights the balance governments must strike between fiscal responsibility and economic stimulus in challenging times.