Germany seeks to cut corporate tax rate to 25%

Germany is looking to cap its corporate tax burden at 25% as the country seeks to help smaller businesses amid signs the economy is lurching into a recession.

The proposal was made by Economy Minister Peter Altmaier on Thursday as part of a package aimed at supporting the so-called Mittelstand -- small and medium-sized businesses that account for nearly 60% of the country’s jobs. According to Deloitte, Germany’s overall tax rate on companies is about 30%-33%.

The German government is under increasing pressure to prop up the economy, with export demand hobbled by trade wars and Brexit uncertainty at a time when the country’s manufacturers need to invest in digital technologies to stay competitive. The tax changes could help ease the strain on German companies, but would take time to make an impact.

The timing of Altmaier’s initiative is another indication that Merkel’s government is becoming increasingly willing to act to prop up the economy. The DIW institute on Wednesday predicted that German output will probably shrink by 0.2% in the third quarter, putting Europe’s largest economy into technical recession. The government is still expecting a recovery toward the end of the year.