Berlin While the right reaction to the US government’s multi-billion dollar subsidy program is still being negotiated at European level, the FDP parliamentary group is now presenting proposals. In a nine-page position paper entitled “Economic freedom instead of subsidies – our response to the Inflation Reduction Act (IRA)”, the Liberals list measures with which they believe the federal government should react. The paper is available to the Handelsblatt.
“The IRA debate in Europe must result in us not reacting with isolation or a subsidy race,” writes the FDP parliamentary group in its position paper. “That’s why we demand that no trade dispute be started with the United States.”
Rather, the EU should immediately start negotiations with the USA about a new free trade agreement. “The USA remains our most important partner,” emphasizes the deputy FDP parliamentary group leader Lukas Köhler.
From the point of view of the Liberals, there is no need for new subsidy pots. In Germany, the Climate and Transformation Fund is available. Expenditure of around 200 billion euros is planned there by 2026.
Improve location conditions instead of new subsidies
Like Federal Finance Minister Christian Lindner (FDP), his parliamentary group also points out that there is already an 800 billion euro program in Europe with the Corona reconstruction fund “Next Generation EU”. “Therefore, we reject new debt, guarantee or contribution-financed instruments, such as the EU sovereignty fund proposed by the Commission,” the paper says.
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Instead of new subsidies, the liberals want to focus on improving the location conditions for companies. “We must now ensure that companies invest here, for example through super write-offs, good research conditions, cheap energy and more free trade,” says parliamentary group leader Köhler.
The FDP parliamentary group also rejects considerations by Federal Minister of Economics Robert Habeck and the Greens to give even more state support to certain economic sectors such as renewable energies. “A state-controlled industrial policy runs the risk that technologies and products will not be promoted because of their innovation and growth potential, but because they are politically desired,” says the paper.
The EU Commission wants to counter the IRA with a sovereignty fund.
(Photo: Reuters)
In order to strengthen companies in Germany, the FDP parliamentary group proposes a number of measures. This includes better immigration opportunities to combat the shortage of skilled workers and the reduction of bureaucracy. Another focus is tax relief for companies.
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The FDP parliamentary group leader Christoph Meyer, who is responsible for financial policy, emphasizes: “Even without the IRA, it would be clear that we would no longer be able to avoid corporate tax reform. The overall burden on companies urgently needs to be reduced.”
The FDP parliamentary group is taking up an agreement from the coalition agreement, according to which companies can claim more generous tax benefits for investments in climate protection. “We will introduce super depreciation in the form of an investment premium,” the paper says.
“Corporate tax cuts must not be taboo”
Despite the resistance of the SPD and Greens, the FDP parliamentary group renewed the call for tax cuts: “Maximum tax rates in combination with very high energy costs and a shortage of skilled workers deter foreign companies from investing in Germany.” move production abroad.
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“Therefore, Germany urgently needs to significantly reduce the overall tax burden on companies,” says the paper. “Reducing the corporate tax rate must not be taboo.”
However, the Social Democrats and the Greens reject such a reduction. FDP politician Meyer therefore criticizes them sharply: “Our coalition partners must finally stop their anti-growth policies and state romanticism,” he says.
FDP proposes VAT increase
In the paper, the FDP parliamentary group announces a concept for reducing income tax. The intensified location competition requires “thinking about a revenue-neutral adjustment of the tax structure”.
Our coalition partners must finally stop their anti-growth policies and state romanticism. FDP parliamentary group leader Christoph Meyer
For years there have been repeated complaints that the tax burden is rising particularly sharply, especially for middle-income earners. “Therefore, in this legislative period we want to develop proposals on how we can achieve structural improvements in income tax, also in order to further reduce the high marginal income tax rates that are hostile to growth,” the paper says.
However, such a tax reform would lead to a loss of revenue in the double-digit billion range for the state. The FDP parliamentary group is now open to counter-financing: “This could be counter-financed through higher indirect taxes, fewer exceptions to the normal VAT rate and a reduction in questionable tax reductions.”
But here, too, the coalition partners are likely to have concerns. While middle and higher incomes tend to benefit from a reduction in income tax, an increase in indirect taxes such as value added tax would also have a negative impact on low-income earners in particular.
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