Corona: Bundestag approves stimulus package – opposition doubts

Germany Corona stimulus package

Bundestag decides to lower VAT and family bonus

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“People want the economy to get going again”

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The Bundestag has approved the stimulus package to strengthen the economy in the Corona crisis. After the vote, Federal Minister of Economics Peter Altmaier was convinced that the tax cut would boost the economy.

Lower taxes and money for families: Finance Minister Scholz had promised a “boom” that should boost consumption. The most important measure is expected to take effect this week. The opposition doubts their effectiveness.

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WTaxes when shopping and money on family accounts: The Bundestag has passed important parts of the economic stimulus package that is intended to boost consumption and the economy in the Corona crisis. Parliament approved the changes on Monday in a special session with the votes of the grand coalition. In order for them to come into force on July 1, the approval of the Federal Council is still required in the afternoon.

A Lower VAT should strengthen the weakened purchasing power due to the corona pandemic and short-time work. By the end of the year, instead of 19, there would only be 16 percent VAT on purchases. The reduced rate, which applies to many groceries and everyday goods, is reduced from seven to five percent.

Many supermarkets, car and furniture stores have already announced that they will pass the savings on to their customers one-to-one – in some cases, prices have already been reduced at the beginning of the week.

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Vacation, returns, electricity contract – – – – –

The opposition nevertheless criticized the temporary tax cut as largely ineffective. It means “absurd bureaucratic effort” for the retail trade, and at the same time an average household saves just 30 euros a month, said FDP parliamentary group leader Christian Dürr. Left and Greens doubted that the savings would really reach the consumer.

Left-wing boss Bernd Riexinger has certified the economic measures decided by the Bundestag as “a clear social imbalance”. As an example, Riexinger stated on Monday that there was “nothing for unemployed people”. It would have been “urgently necessary to increase the Hartz IV rates”, since more people would become unemployed in the course of the Corona crisis and could slide into Hartz IV. In addition, for nurses in the stimulus package “nothing is planned”. The tax cut was a bold, unpredictable bet, it said from the left-wing faction. The AfD also questioned economic impulses.

Bonus for every child entitled to child benefit

The second major component of the stimulus package is a Bonus of 300 euros for each child entitled to child benefit. The first 200 euros are to be paid with child benefit in September, the remaining 100 euros in October. The child bonus is not counted towards the basic security, but is offset against the tax-free child allowance for higher earners, so that families with less money benefit in particular.

There are further facilities for companies, for example through changed depreciation rules. In addition, they should be able to offset current crisis-related losses better with profits from the previous year and thus have more money in the checkout in difficult times.

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The federal government bears most of the costs for the economic stimulus package: Almost 13 billion euros in tax losses will result from the reduction in VAT, and the children’s bonus will add another 5.4 billion euros. To solve this, Finance Minister Olaf Scholz (SPD) wants to take out more loans. In the meantime, record debts of 218.5 billion euros are planned for 2020. The Bundestag is scheduled to adopt the second supplementary budget later this week.

The other measures in the overview:

Single parent: For single parents, who were particularly heavily burdened during the crisis, the so-called relief contribution in 2020 and 2021 will be increased from 1908 euros to 4000 euros. This works like an allowance.

Ease for entrepreneurs: The tax loss carryforward will be expanded to five million euros for the years 2020 and 2021 (ten million euros for joint assessment). In addition, degressive depreciation of 25 percent, but no more than 2.5 times linear depreciation, will be introduced for movable assets that are acquired or manufactured in 2020 and 2021. Both are intended to increase the liquidity of companies. In addition, there is a reduction in trade tax and an increase in the tax research allowance.

Emission-free company car: The current tax discount for company cars without CO2 emissions, in particular electric cars, will in future be granted up to a list price of EUR 60,000. So far, the limit was 40,000 euros.

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