German coalition approves tax and pension reform package

Berlin – Chancellor Olaf Scholz announced a comprehensive tax and pension reform package on Wednesday as his government confronts a rising tide of support for the far‑right Alternative für Deutschland (AfD) and mounting pressure to reinvigorate a stagnating economy. The plan proposes a gradual reduction of the corporate tax rate from 15 percent to 13 percent by 2030, a modest increase in the basic income‑tax allowance, and the introduction of a “green investment credit” aimed at encouraging renewable‑energy projects. In parallel, the pension component seeks to raise the statutory retirement age from 67 to 68 by 2035, adjust pension contributions to reflect longer life expectancy, and create a supplemental “solidarity fund” financed by higher earners to shore up the pay‑as‑you‑go system.

The reforms are presented as a bid to boost investment, address demographic challenges, and restore confidence ahead of the upcoming federal elections, where the AfD has made significant gains in regional polls. Coalition partners from the Greens and the FDP have signaled conditional support, citing the need for fiscal sustainability, while opposition parties warned that the measures could strain low‑income households. The chancellor emphasized that the package balances growth incentives with social security, and said the government will seek parliamentary approval within the next month, aiming to set the economy on a more robust trajectory before the year’s end.