Germany's Chancellor Merz rejects tax hikes, pushes for relief by 2026
Chancellor Friedrich Merz has firmly ruled out any tax increases while outlining plans for future tax relief. Speaking at a CDU/CSU parliamentary group meeting, he stressed that upcoming measures must ease financial burdens rather than add to them. The government has already set out a series of tax cuts, but key decisions on further relief are expected in the coming months. The federal government has introduced several tax relief measures in recent months. From January 1, 2026, the commuter allowance will rise permanently to 38 cents per kilometre. The VAT rate on restaurant meals has also been reduced to 7 percent. Additional income tax cuts for low and middle earners are planned by mid-legislature, while corporate taxes will gradually decrease from 2028—dropping by one percentage point each year over five years. Businesses will also benefit from a 30 percent degressive depreciation allowance on equipment investments until December 31, 2027.
Merz acknowledged that the coalition had agreed to act on tax policy but insisted any changes must provide relief. He expressed interest in the finance minister's upcoming proposals for targeted income tax reductions. However, he warned that time for major reforms is running short, as half the legislative term will pass by the end of the year.
The chancellor highlighted that the window for key decisions lies between Easter and the summer break. After that, he suggested, progress tends to slow in the second half of a legislative term. He also noted that adjustments for specific income groups could still be made through social security contributions. The government's tax plans include permanent commuter benefits, lower VAT on meals, and phased corporate tax cuts. With the legislative term halfway through, Merz has set a tight timeline for further discussions. Any additional relief for low and middle incomes will likely depend on the finance minister's proposals and potential adjustments to social security contributions.
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