Germany's ruling coalition reaches agreement on tax reform
German Chancellor Friedrich Merz announced that the ruling coalition has agreed on a tax reform that will lower the burden for low- and middle-income earners by increasing taxes on the wealthy.
German Chancellor Friedrich Merz confirmed on Thursday that the ruling coalition, comprising the conservative Christian Democratic Union (CDU) and the Social Democratic Party (SPD), has reached an agreement on tax reform. The reform aims to reduce the tax burden on low- and middle-income earners while increasing taxes on the wealthiest segments of society.
After months of negotiations, which took place against a backdrop of historically low approval ratings for the coalition, the parties have finally agreed on a key reform package. Merz emphasized that these changes are necessary to revitalize the German economy and boost public support for the government.
The reform provides specific tax relief: for example, a family of four with an annual taxable income of €60,000 will save about €600 per year. To finance these cuts, taxes will be raised on higher incomes. For annual incomes above €250,000, the tax rate will increase to 45%, and for incomes above €280,000, it will rise to 47%.
In addition to the tax reform, the coalition agreed on a new trade strategy aimed at protecting German companies from unfair competition, particularly from China. Finance Minister Lars Klingbeil stated that in strategically important sectors such as infrastructure and defense, the country will focus on European production.
The reform package complements previously reached agreements on changes to the pension and health insurance systems. The coalition is also seeking to improve labor market efficiency by encouraging Sunday work. However, all these changes still require parliamentary approval.
