German business tax relief package cut to 3.2 bln euros annually -sources

The mediation committee's agreement lowers the expected income shortfall for municipalities to around 555 million euros, for the federal government to just under 1.4 billion euros and for the federal states to just under 1.3 billion euros, the sources said. A planned state subsidy of 15% of the total amount for investments in climate protection measures - seen as the centrepiece of the law - has been dropped from the package, according to the sources.

Germany's tax relief for small and medium-sized companies will be 3.2 billion euros ($3.45 billion) annually, about half the amount planned originally, three sources familiar with the negotiations of a mediation committee told Reuters on Friday. The government's Growth Opportunities Act, a package aimed at unleashing new investment amid weak foreign demand and high interest rates, passed the lower house of parliament in November but then faced opposition in the Bundesrat, the legislative body that represents the 16 German states at the federal level.

The states and municipalities would have had to shoulder the bulk of the expected tax revenue shortfall and therefore they opposed the law. The mediation committee's agreement lowers the expected income shortfall for municipalities to around 555 million euros, for the federal government to just under 1.4 billion euros and for the federal states to just under 1.3 billion euros, the sources said.

A planned state subsidy of 15% of the total amount for investments in climate protection measures - seen as the centrepiece of the law - has been dropped from the package, according to the sources. Instead companies are to be given additional depreciation options. ($1 = 0.9289 euros)