On August 29, 2019, German Economy Minister Peter Altmaier announced the outlines of a plan to reduce the tax and regulatory burden on small and medium-sized companies in Germany.

In presenting the SME Strategy, Altmaier proposed reducing the tax burden on SMEs through a gradual phasing out of the solidarity tax, and by limiting the level of corporate tax paid by such firms to 25 percent of profits. Altmaier also called for a tax ceiling for private companies, which would limit their overall tax burden to 45 percent.

The solidarity tax is a 5.5 percent surcharge on personal and corporate income, which has been used to fund economic development in the former East Germany. Earlier this month, the Government announced that this tax would be narrowed in scope for individual taxpayers from 2021, a measure that would mean that 90 percent of taxpayers would no longer have to pay it.

While the headline rate of corporate tax at the federal level is currently 15 percent, local taxes and the solidarity tax increase the combined rate to over 30 percent on average.The plan also envisages a reduction in SMEs' administrative burden by EUR1bn (USD1.1bn) through the implementation of a new Bureaucratic Relief Act.