VAT is temporarily reduced, parents relieved with a 300-euro bonus per child, social security contributions capped: the GroKo package includes 57 points. This includes an auto purchase premium, but not for incinerators. The decisions at a glance.
From 1 July to 31 December, the VAT rate will be reduced from 19 to 16 per cent and the reduced rate from 7 per cent to five per cent. The reduced rate applies to everyday goods, such as food. The aim is to strengthen domestic consumption. The move costs around 20 billion euros. According to CSU Chairman Markus Söder, the reduction is the “heart” of the package.
Families and daycare centres
Families get more money. A one-time child bonus of 300 euros per child is planned for each child entitled to child benefit. The bonus must be taxed, but it will not be counted against the basic security.
There will be an additional one billion euros for extensions, conversions or new constructions of daycare centres and nurseries – also to improve the hygiene situation.
Motorists and the car industry
The Grand Coalition decided against a purchase premium for low-emission gasoline and diesel cars – plans for this were fiercely disputed. The SPD leadership was against it. Demand for gasoline and diesel cars should be boosted by the lower VAT, Söder made clear. However, the leaders of the Union and the SPD decided on significantly higher premiums for electric cars.
Federal funding for the existing “environmental premium” is to increase from 3000 to 6000 euros for a limited period until the end of 2021 for e-vehicles with a net list price of up to 40,000 euros. In addition, there is support for manufacturers. The Coalition also plans to invest an additional 2.5 billion euros in the expansion of the charging network for electric cars and for the promotion of research and development, for example in battery cell production.
A “bonus programme” of TWO billion euros is to be launched for the future investments of manufacturers and the supplier industry for the years 2020 and 2021. The automotive industry is in a transition towards alternative drives, and there is also the digital transformation.
Citizens and businesses should be relieved of the burden of electricity costs. To this end, the EEG levy for the promotion of green electricity plants is to be reduced from 2021 by subsidies from the federal budget. The levy is threatening to rise sharply in the context of the Corona crisis.
It is now expected to be 6.5 cents per kilowatt hour in 2021 and 6 cents in 2022 – currently the levy that citizens pay through the electricity bill is 6.76 cents. Without countermeasures, however, according to experts, it is likely to be significantly higher in the coming year.
Rail and local transport
Deutsche Bahn receives billions in financial aid due to loss of revenue in the Corona crisis. The federal government intends to provide the federally owned group with additional equity capital amounting to five billion euros. It also plans to provide EUR 2.5 billion in aid for public transport.
Local authorities are at risk of heavy tax losses because the business tax, in particular, is the main source of income. Losses in business tax revenues are to be compensated by the federal and state governments together. The federal government wants to take over almost six billion euros. Objective: The municipalities should be able to remain able to act and be able to continue to invest – this is important, for example, for the construction industry and the craft sector. There should be no takeover of old debts by the federal government, Finance Minister Olaf Scholz (SPD) failed with his plans due to the resistance of the Union.
Social security contributions
As a result of the Corona crisis, spending in all social security systems is increasing. To prevent an increase in non-wage labour costs, the Coalition is planning a “Social Guarantee 2021”. The social security contributions are to be stabilized at a maximum of 40 percent, through billions of dollars in subsidies from the federal budget. The cost of the “Social Guarantee 2021” is estimated at 5.3 billion euros for 2020 – according to the coalition, they are not yet foreseeable for 2021. The measure is designed to protect workers’ net incomes and provide reliability for employers.
Particularly burdened industries and businesses receive billions of dollars in additional support. The plan is for “bridging aid” to a maximum of EUR 25 billion. The aim is to prevent a wave of bankruptcies among small and medium-sized enterprises whose sales have been broken.
The bridging aid is to be granted for the months of June to August. It should apply to sectors such as the hotel and catering industry, clubs and bars, travel agencies, showmen, but also professional sports clubs in the lower leagues. Fixed operating costs of up to 150,000 euros for three months are to be reimbursed.
A programme to mitigate the impact of the Corona in the cultural sector is also planned, amounting to EUR 1 billion. In addition, tax relief for companies is planned. In this way, the so-called tax loss recovery is extended. Companies can thus offset current crisis-related losses with profits from the previous year in the current year – this is intended to strengthen liquidity. The Coalition also wants to improve depreciation rules to help companies invest more.
In addition, corporate tax law should be modernised. There are also plans for greater investment in future technologies. To this end, a future package of more than 50 billion is to be put in place for the next few years. As a first measure, for example, the tax research allowance is to be extended. Funding for artificial intelligence is to be significantly increased. The expansion of the superfast new mobile phone standard 5G is to be accelerated. Germany is also to become a pioneer in state-of-the-art hydrogen technology.